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Revisiting the effects of cigarette taxation on smoking outcomes

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  • Vinish Shrestha

    (Towson University, Economics Department)

Abstract

This study reassesses the efficacy of cigarette taxation in curtailing smoking by leveraging recent advancements in the difference-in-differences (DiD) literature to account for heterogeneous treatment effects. Using data from the Behavioral Risk Factor Surveillance System Selected Metropolitan/Micropolitan Area Risk Trend (BRFSS SMART) for the sample periods 2004-2010 and 2015-2020, the study reveals three key findings. Firstly, the TWFE estimate for the 2004-2010 sample is only 48% of the average treatment effect on the treated (ATT) estimate obtained through the DiD framework. Secondly, event-study-type estimates demonstrate a gradual increase in magnitude following the treatment year, highlighting dynamic treatment effects overlooked by the TWFE estimate. Third, the ATT estimate for the 2015-2020 sample is approximately 66% of the ATT estimate for the 2004-2010 sample. Overall, the study underscores the potential bias toward zero in elasticity estimates when relying solely on TWFE models.

Suggested Citation

  • Vinish Shrestha, 2025. "Revisiting the effects of cigarette taxation on smoking outcomes," Empirical Economics, Springer, vol. 68(3), pages 1429-1475, March.
    • Handle: RePEc:spr:empeco:v:68:y:2025:i:3:d:10.1007_s00181-024-02674-0
    DOI: 10.1007/s00181-024-02674-0
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    More about this item

    Keywords

    Cigarette taxation; Difference-in-differences; Treatment heterogeneity; Dynamic treatment effects; Elasticity;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D00 - Microeconomics - - General - - - General
    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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