IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/15942.html
   My bibliography  Save this paper

Who Pays Cigarette Taxes? The Impact of Consumer Price Search

Author

Listed:
  • Philip DeCicca
  • Donald S. Kenkel
  • Feng Liu

Abstract

We conduct an empirical study of the impact of consumer price-search on the shifting of cigarette excise taxes to consumer prices. We use novel data on the prices smokers report actually paying for cigarettes. We document substantial price dispersion. We find that cigarette taxes are shifted at lower rates to the prices paid by consumers who undertake more price search - carton buyers, and especially, smokers who buy cartons of cigarettes in a state other than their state of residence. We also find suggestive evidence that taxes are shifted at slightly higher rates to the prices paid by non-daily smokers, less addicted smokers, and smokers of light cigarettes.

Suggested Citation

  • Philip DeCicca & Donald S. Kenkel & Feng Liu, 2010. "Who Pays Cigarette Taxes? The Impact of Consumer Price Search," NBER Working Papers 15942, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15942
    Note: HE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w15942.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philip DeCicca & Donald Kenkel & Alan Mathios & Yoon-Jeong Shin & Jae-Young Lim, 2008. "Youth smoking, cigarette prices, and anti-smoking sentiment," Health Economics, John Wiley & Sons, Ltd., vol. 17(6), pages 733-749.
    2. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects, and Econometric Policy Evaluation," Econometrica, Econometric Society, vol. 73(3), pages 669-738, May.
    3. repec:aph:ajpbhl:10.2105/ajph.2004.061622_8 is not listed on IDEAS
    4. Keeler, Theodore E. & Hu, Teh-wei & Barnett, Paul G. & Manning, Willard G. & Sung, Hai-Yen, 1996. "Do cigarette producers price-discriminate by state? An empirical analysis of local cigarette pricing and taxation," Journal of Health Economics, Elsevier, vol. 15(4), pages 499-512, August.
    5. Saul Lach, 2002. "Existence And Persistence Of Price Dispersion: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 433-444, August.
    6. Delipalla, Sophia & O'Donnell, Owen, 2001. "Estimating tax incidence, market power and market conduct: The European cigarette industry," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 885-908, May.
    7. DeCicca, Philip & Kenkel, Donald & Liu, Feng, 2013. "Excise tax avoidance: The case of state cigarette taxes," Journal of Health Economics, Elsevier, vol. 32(6), pages 1130-1141.
    8. Gregory J. Colman & Dahlia K. Remler, 2008. "Vertical equity consequences of very high cigarette tax increases: If the poor are the ones smoking, how could cigarette tax increases be progressive?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(2), pages 376-400.
    9. repec:aph:ajpbhl:2004:94:2:225-229_5 is not listed on IDEAS
    10. Hanson, Andrew & Sullivan, Ryan, 2009. "The Incidence of Tobacco Taxation: Evidence From Geographic Micro-Level Data," National Tax Journal, National Tax Association, vol. 62(4), pages 677-698, December.
    11. Lyon, Andrew B & Schwab, Robert M, 1995. "Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 389-406, August.
    12. Johnson, Terry R, 1978. "Additional Evidence on the Effects of Alternative Taxes on Cigarette Prices," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 325-328, April.
    13. Donald S. Kenkel, 2005. "Are Alcohol Tax Hikes Fully Passed Through to Prices? Evidence from Alaska," American Economic Review, American Economic Association, vol. 95(2), pages 273-277, May.
    14. James Alm & Edward Sennoga & Mark Skidmore, 2009. "Perfect Competition, Urbanization, And Tax Incidence In The Retail Gasoline Market," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 118-134, January.
    15. Barzel, Yoram, 1976. "An Alternative Approach to the Analysis of Taxation," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1177-1197, December.
    16. Besley, Timothy, 1989. "Commodity taxation and imperfect competition : A note on the effects of entry," Journal of Public Economics, Elsevier, vol. 40(3), pages 359-367, December.
    17. Stern, Nicholas, 1987. "The effects of taxation, price control and government contracts in oligopoly and monopolistic competition," Journal of Public Economics, Elsevier, vol. 32(2), pages 133-158, March.
    18. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:taf:applec:v:48:y:2016:i:41:p:3976-3994 is not listed on IDEAS
    2. Bishop, James, 2015. "Interacting effects of state cigarette taxes on smoking participation," MPRA Paper 66609, University Library of Munich, Germany.
    3. Nicoletta Berardi & Patrick Sevestre & Marine Tépaut & Alexandre Vigneron, 2016. "The impact of a ‘soda tax’ on prices: evidence from French micro data," Applied Economics, Taylor & Francis Journals, vol. 48(41), pages 3976-3994, September.
    4. Adel Bosch and Steven F. Koch, 2014. "Using a Natural Experiment to Examine Tobacco Tax Regressivity," Working Papers 434, Economic Research Southern Africa.
    5. Lesley Chiou & Erich Muehlegger, 2014. "Consumer Response to Cigarette Excise Tax Changes," National Tax Journal, National Tax Association, vol. 67(3), pages 621-650, September.
    6. Mario Jametti & Agustin Redonda & Anindya Sen, 2013. "The Power to Pass on Taxes - A Test for Tax Shifting based on Observables," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1301, USI Università della Svizzera italiana.
    7. Kyle Rozema & Nicolas Ziebarth, 2015. "Behavioral Responses to Taxation: Cigarette Taxes and Food Stamp Take-Up," Working Papers 150015, Canadian Centre for Health Economics.
    8. Leah K. Lakdawala & David Simon, 2016. "The Intergenerational Consequences of Tobacco Policy," Working papers 2016-27, University of Connecticut, Department of Economics.
    9. Hansen, Benjamin & Sabia, Joseph J. & Rees, Daniel I., 2011. "Cigarette Taxes and the Social Market," IZA Discussion Papers 5580, Institute for the Study of Labor (IZA).
    10. repec:eme:aheszz:s0731-219920170000025005 is not listed on IDEAS
    11. Philip DeCicca & Donald Kenkel & Feng Liu & Hua Wang, 2017. "Behavioral Welfare Economics and FDA Tobacco Regulations," Advances in Health Economics and Health Services Research,in: Human Capital and Health Behavior, volume 25, pages 143-179 Emerald Publishing Ltd.
    12. DeCicca, Philip & Kenkel, Donald & Liu, Feng, 2013. "Excise tax avoidance: The case of state cigarette taxes," Journal of Health Economics, Elsevier, vol. 32(6), pages 1130-1141.
    13. Benjamin Hansen & Daniel I. Rees & Joseph J. Sabia, 2013. "Cigarette Taxes and How Youths Obtain Cigarettes," National Tax Journal, National Tax Association, vol. 66(2), pages 371-394, June.
    14. Kevin Callison & Robert Kaestner, 2014. "Do Higher Tobacco Taxes Reduce Adult Smoking? New Evidence Of The Effect Of Recent Cigarette Tax Increases On Adult Smoking," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 155-172, January.
    15. Don Fullerton & Erich Muehlegger, 2017. "Who Bears the Economic Costs of Environmental Regulations?," CESifo Working Paper Series 6596, CESifo Group Munich.
    16. Philip DeCicca & Donald Kenkel & Feng Liu, 2015. "Reservation Prices: An Economic Analysis of Cigarette Purchases on Indian Reservations," National Tax Journal, National Tax Association, vol. 68(1), pages 93-118, March.

    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:15942. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: () or (Joanne Lustig). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.