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E-Cigarettes and Adult Smoking: Evidence from Minnesota

Author

Listed:
  • Henry Saffer
  • Daniel L. Dench
  • Michael Grossman
  • Dhaval M. Dave

Abstract

E-cigarettes use a battery powered heater to turn a liquid containing nicotine into a vapor. The vapor is inhaled by the user and is generally considered to be less harmful than the smoke from combustible cigarettes because the vapor does not contain the toxins that are found in tobacco smoke. Because e-cigarettes provide an experience that is very similar to smoking, they may be effective in helping smokers to quit, and thus the availability of e-cigarettes could increase quit rates. Alternatively, e-cigarettes may provide smokers with a method of bypassing smoking restrictions and prolong the smoking habit. There is very little causal evidence to date on how e-cigarette use impacts smoking cessation among adults. Although there is no federal tax on e-cigarettes, a few states have recently imposed heavy taxes on them. We provide some of the first evidence on how e-cigarette taxes impact adult smokers, exploiting the large tax increase in Minnesota. That state was the first to impose a tax on e-cigarettes by extending the definition of tobacco products to include e-cigarettes. This tax, which is 95% of the wholesale price, provides a plausibly exogenous deterrent to e-cigarette use. We utilize data from the Current Population Survey Tobacco Use Supplements from 1992 to 2015, in conjunction with a synthetic control difference-in-differences approach. We assess how this large tax increase impacted smoking cessation among adult smokers. Estimates suggest that the e-cigarette tax increased adult smoking and reduced smoking cessation in Minnesota, relative to the control group, and imply a cross elasticity of current smoking participation with respect to e-cigarette prices of 0.13. Our results suggest that in the sample period about 32,400 additional adult smokers would have quit smoking in Minnesota in the absence of the tax. If this tax were imposed on a national level about 1.8 million smokers would be deterred from quitting in a ten year period. The taxation of e-cigarettes at the same rate as cigarettes could deter more than 2.75 million smokers nationally from quitting in the same period. The public health benefits of not taxing e-cigarettes, however, must be weighed against effects of this decision on efforts to reduce vaping by youth.

Suggested Citation

  • Henry Saffer & Daniel L. Dench & Michael Grossman & Dhaval M. Dave, 2019. "E-Cigarettes and Adult Smoking: Evidence from Minnesota," NBER Working Papers 26589, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26589
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    References listed on IDEAS

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    1. Dave, Dhaval & Saffer, Henry, 2013. "Demand for smokeless tobacco: Role of advertising," Journal of Health Economics, Elsevier, vol. 32(4), pages 682-697.
    2. Cotti, Chad & Nesson, Erik & Tefft, Nathan, 2018. "The relationship between cigarettes and electronic cigarettes: Evidence from household panel data," Journal of Health Economics, Elsevier, vol. 61(C), pages 205-219.
    3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716.
    4. Yuqing Zheng & Chen Zhen & Daniel Dench & James M. Nonnemaker, 2017. "U.S. Demand for Tobacco Products in a System Framework," Health Economics, John Wiley & Sons, Ltd., vol. 26(8), pages 1067-1086, August.
    5. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    6. Yuqing Zheng & Chen Zhen & James Nonnemaker & Daniel Dench, 2016. "Advertising, Habit Formation, and U.S. Tobacco Product Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(4), pages 1038-1054.
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    More about this item

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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