The Heterogeneous Geographic and Socioeconomic Incidence of Cigarette Taxes: Evidence from Nielsen Homescan Data
We use Nielsen Homescan data to examine who bears the economic burden of cigarette taxes. We find cigarette taxes are less than fully passed through to consumer prices, suggesting consumers and producers split the excess burden of these taxes. Using information on consumer location, we show the availability of lower-tax goods across state borders creates significant differences in the pass-through rate. Tax avoidance opportunities also have a sizable effect on purchasing behavior by altering consumer search, prices paid and quantities purchased. Finally, we demonstrate that the incidence of cigarette taxes and the border effect varies by household income and education. (JEL D12, H22, H25, H26, H71, L66)
Volume (Year): 4 (2012)
Issue (Month): 4 (November)
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- Mark Aguiar & Erik Hurst, 2007.
"Life-Cycle Prices and Production,"
American Economic Review,
American Economic Association, vol. 97(5), pages 1533-1559, December.
- Burda, Martin & Harding, Matthew & Hausman, Jerry, 2008.
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- Martin Burda & Matthew Harding & Jerry Hausman, 2008. "A Bayesian mixed logit-probit model for multinomial choice," CeMMAP working papers CWP23/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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