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Demand for cigarettes in the United States: effects of prices in bordering states and contiguity with Mexico and Canada

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  • Richard Connelly
  • Rajeev Goel
  • Rati Ram

Abstract

Based on a cross-section of US states for 2004, this article estimates a demand function for cigarettes after including a proxy for prices in the bordering states and simple proxies for contiguity with Mexico and Canada and for being a major tobacco producer. One major point seems to be that the negative elasticity for within-state price is similar in magnitude to the positive elasticity for the (lowest) price in bordering states. Several additional points also seem noteworthy. First, having a border with Mexico lowers sales in the state sizably. Second, the share of Hispanic/Latino population in the state also lowers sales significantly. Third, contiguity with Canada appears to have no significant effect. Fourth, partial impact of the state being a major tobacco producer appears minor even though consumption in these states is considerably higher. Fifth, education shows the expected negative association with cigarette consumption, but its statistical significance is low. Last, income carries a weak negative parameter, perhaps reflecting the lower prevalence of smoking in higher-income households.

Suggested Citation

  • Richard Connelly & Rajeev Goel & Rati Ram, 2009. "Demand for cigarettes in the United States: effects of prices in bordering states and contiguity with Mexico and Canada," Applied Economics, Taylor & Francis Journals, vol. 41(18), pages 2255-2260.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:18:p:2255-2260
    DOI: 10.1080/00036840701222637
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    Citations

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    Cited by:

    1. Adel Bosch & Steven F. Koch, 2014. "Using a Natural Experiment to Examine Tobacco Tax Regressivity," Working Papers 201424, University of Pretoria, Department of Economics.
    2. Goel, Rajeev K. & Payne, James E. & Saunoris, James W., 2016. "Spillovers from the beer market to U.S. cigarette demand," Economic Modelling, Elsevier, vol. 55(C), pages 292-297.
    3. Koch, Steven F., 2018. "Quasi-experimental evidence on tobacco tax regressivity," Social Science & Medicine, Elsevier, vol. 196(C), pages 19-28.
    4. 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.
    5. Huynh, Dat & Sokolova, Anna & Tosun, Mehmet S., 2022. "Tax Elasticity of Border Sales: A Meta-Analysis," IZA Discussion Papers 15525, Institute of Labor Economics (IZA).
    6. Bishop, James, 2015. "Interacting effects of state cigarette taxes on smoking participation," MPRA Paper 66609, University Library of Munich, Germany.
    7. Nicholas Apergis & Rajeev Goel & James Payne, 2014. "Dynamics of U.S. State Cigarette Consumption: Evidence from Panel Error Correction Modeling," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(1), pages 3-20, March.
    8. James M. Bishop, 2018. "Does Cigarette Smuggling Prop Up Smoking Rates?," American Journal of Health Economics, MIT Press, vol. 4(1), pages 80-104, Winter.
    9. Richard Cebula & Maggie Foley & Robert Houmes, 2014. "Empirical analysis of the impact of cigarette excise taxes on cigarette consumption: estimates from recent state-level data," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(1), pages 164-180, January.
    10. Balaguer, Jacint & Ripollés, Jordi, 2018. "Disentangling the importance of international border effects. Some evidence from Portugal–Spain based on diesel retailers," Economic Modelling, Elsevier, vol. 72(C), pages 260-269.
    11. Richard J. Cebula & Fabrizio Rossi, 2015. "Does the Presence of Very Young Children and/or Older Minor-aged Children in the Home Reduce Cigarette Smoking? Panel Data Evidence for the United States," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 9(4), pages 430-441, November.
    12. Matthew C Farrelly & James M Nonnemaker & Kimberly A Watson, 2012. "The Consequences of High Cigarette Excise Taxes for Low-Income Smokers," PLOS ONE, Public Library of Science, vol. 7(9), pages 1-7, September.

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