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Cigarette demand in Canada and the US-Canadian cigarette smuggling

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  • Rajeev Goel

Abstract

Using annual data from Canadian provinces, this paper studies the effects of a drastic reduction in Canadian cigarette taxes in 1994 on cross-border smuggling. The results show that the policy was successful in that the border prices seem to not have had a statistically significant impact on cigarette sales. The own price elasticity of cigarette demand in Canada is estimated to be around -0.7. The elasticity is slightly lower when the border-price effects are taken into account and is larger than the corresponding estimates for the USA, implying that dollar-for-dollar there might be greater opportunities for reducing smoking in Canada through higher taxes than the USA.

Suggested Citation

  • Rajeev Goel, 2004. "Cigarette demand in Canada and the US-Canadian cigarette smuggling," Applied Economics Letters, Taylor & Francis Journals, vol. 11(9), pages 537-540.
    • Handle: RePEc:taf:apeclt:v:11:y:2004:i:9:p:537-540
    DOI: 10.1080/1350485042000263043
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    References listed on IDEAS

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    1. Galbraith, John W. & Kaiserman, Murray, 1997. "Taxation, smuggling and demand for cigarettes in Canada: Evidence from time-series data," Journal of Health Economics, Elsevier, vol. 16(3), pages 287-301, June.
    2. Frank Reinhardt & David Giles, 2001. "Are cigarette bans really good economic policy?," Applied Economics, Taylor & Francis Journals, vol. 33(11), pages 1365-1368.
    3. Gruber, Jonathan & Sen, Anindya & Stabile, Mark, 2003. "Estimating price elasticities when there is smuggling: the sensitivity of smoking to price in Canada," Journal of Health Economics, Elsevier, vol. 22(5), pages 821-842, September.
    4. Badi H. Baltagi & Rajeev K. Goel, 1987. "Quasi-Experimental Price Elasticities of Cigarette Demand and the Bootlegging Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 750-754.
    5. Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-155, February.
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    Cited by:

    1. Peyton Michael Ferrier, 2021. "Detecting origin fraud with trade data: the case of U.S. honey imports," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(1), pages 222-245, January.
    2. Rajeev Goel & Michael Nelson, 2012. "Cigarette demand and effectiveness of U.S. smoking control policies: state-level evidence for more than half a century," Empirical Economics, Springer, vol. 42(3), pages 1079-1095, June.
    3. Junmin Wan, 2006. "Cigarette tax revenues and tobacco control in Japan," Applied Economics, Taylor & Francis Journals, vol. 38(14), pages 1663-1675.
    4. Auld M. Christopher & Zarrabi Mahmood, 2015. "Long-Term Effects of Tobacco Prices Faced by Adolescents," Forum for Health Economics & Policy, De Gruyter, vol. 18(1), pages 1-24, January.
    5. Yanjun Ren & Bente Castro Campos & Jens-Peter Loy, 2020. "Drink and smoke; drink or smoke? The interdependence between alcohol and cigarette consumption for men in China," Empirical Economics, Springer, vol. 58(3), pages 921-955, March.
    6. Ferrier, Peyton Michael, 2008. "Illicit Agricultural Trade," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), pages 1-15.
    7. Goel, Rajeev K. & Nelson, Michael A., 2007. "The Master Settlement Agreement and cigarette tax policy," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 431-438.
    8. Rajeev K. Goel & Michael A. Nelson, 2006. "The Effectiveness of Anti‐Smoking Legislation: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 325-355, July.

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