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The Micro-geography of Tax Avoidance: Evidence from Littered Cigarette Packs in Chicago

Listed author(s):
  • David Merriman

The large tax differentials between Chicago and neighboring jurisdictions provide an incentive for cigarette tax avoidance. Data from a random sample of cigarette packs littered in Chicago reveals a startling degree of tax avoidance: three-quarters did not display a Chicago tax stamp. Also, the $2.68 difference between the tax in Chicago and surrounding counties decreases the probability of a local stamp by almost 60 percent, and a one mile increase in distance to the lower-tax state border increases the probability a pack of a local stamp by about one percent. These results are consistent with the predictions of economic theory. (JEL H25, H26, H71)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.2.2.61
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File URL: http://www.aeaweb.org/aej/pol/data/2008-0088_data.zip
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Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 2 (2010)
Issue (Month): 2 (May)
Pages: 61-84

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Handle: RePEc:aea:aejpol:v:2:y:2010:i:2:p:61-84
Note: DOI: 10.1257/pol.2.2.61
Contact details of provider: Web page: https://www.aeaweb.org/aej-policy
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  1. Jha, Prabhat & Chaloupka, Frank (ed.), 2000. "Tobacco Control in Developing Countries," OUP Catalogue, Oxford University Press, number 9780192632463, December.
  2. Stehr, Mark, 2005. "Cigarette tax avoidance and evasion," Journal of Health Economics, Elsevier, vol. 24(2), pages 277-297, March.
  3. Joel Slemrod, 2007. "Cheating Ourselves: The Economics of Tax Evasion," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 25-48, Winter.
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