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The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data

Author

Listed:
  • Chad D. Cotti
  • Charles J. Courtemanche
  • Johanna Catherine Maclean
  • Erik T. Nesson
  • Michael F. Pesko
  • Nathan Tefft

Abstract

We explore the effect of e-cigarette taxes enacted in eight states and two large counties on e-cigarette prices, e-cigarette sales, and sales of other tobacco products. We use the Nielsen Retail Scanner data from 2011 to 2017, comprising approximately 35,000 retailers nationally. We calculate a Herfindahl–Hirschman Index of 0.251 for e-cigarette retail purchases, indicating high market concentration, and a tax-to-price pass-through of 1.6. We then calculate an e-cigarette own-price elasticity of -2.6 and a positive cross-price elasticity of demand between e-cigarettes and traditional cigarettes of 1.1, suggesting that e-cigarettes and traditional cigarettes are economic substitutes. We simulate that for every one standard e-cigarette pod (a device that contains liquid nicotine in e-cigarettes) of 0.7 ml no longer purchased as a result of an e-cigarette tax, the same tax increases traditional cigarettes purchased by 6.2 extra packs.

Suggested Citation

  • Chad D. Cotti & Charles J. Courtemanche & Johanna Catherine Maclean & Erik T. Nesson & Michael F. Pesko & Nathan Tefft, 2020. "The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data," NBER Working Papers 26724, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26724
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    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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