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Behavioral Responses to Taxation: Cigarette Taxes and Food Stamp Take-Up

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  • Rozema, Kyle

    (Cornell University)

  • Ziebarth, Nicolas R.

    (ZEW)

Abstract

This paper investigates a previously unexplored behavioral response to taxation: whether smokers compensate for higher cigarette taxes by enrolling in food stamps. First, we show theoretically that increases in cigarette taxes can induce food stamp take-up of non-enrolled, eligible smoking households. Then, we study the theoretical predictions empirically by exploiting between and within-household variation in food stamp enrollment from the Current Population Survey as well as data from the Consumer Expenditure Survey. The empirical evidence strongly supports the model predictions. Higher cigarette taxes increase the probability that low-income smoking households take-up food stamps.

Suggested Citation

  • Rozema, Kyle & Ziebarth, Nicolas R., 2015. "Behavioral Responses to Taxation: Cigarette Taxes and Food Stamp Take-Up," IZA Discussion Papers 8907, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8907
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    More about this item

    Keywords

    unintended consequences; cigarette taxes; food stamp take-up; tax pass-through rate;
    All these keywords.

    JEL classification:

    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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