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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. Bishop, James, 2015. "Interacting effects of state cigarette taxes on smoking participation," MPRA Paper 66609, University Library of Munich, Germany.
    2. Adel Bosch and Steven F. Koch, 2014. "Using a Natural Experiment to Examine Tobacco Tax Regressivity," Working Papers 434, Economic Research Southern Africa.
    3. 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.
    4. 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.
    5. 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.
    6. 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.

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