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

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

Abstract

We estimate the effect of e-cigarette tax rates on e-cigarette prices, e-cigarette sales, and sales of other tobacco products using NielsenIQ Retail Scanner data from 2013 to 2019. We find that 90% of e-cigarette taxes are passed on to consumer retail prices. We then estimate reduced form and instrumental variables regressions to examine the effects of e-cigarette and cigarette taxes and prices on sales. We calculate an e-cigarette own-price elasticity of -2.2 and particularly large elasticity of demand for flavored e-cigarettes. Further, we document a cigarette own-price elasticity of -0.4 and positive cross-price elasticities of demand between e-cigarettes and cigarettes, suggesting economic substitution.

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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    Cited by:

    1. Donald S. Kenkel & Sida Peng & Michael F. Pesko & Hua Wang, 2020. "Mostly harmless regulation? Electronic cigarettes, public policy, and consumer welfare," Health Economics, John Wiley & Sons, Ltd., vol. 29(11), pages 1364-1377, November.
    2. Michael F. Pesko & Casey Warman, 2022. "Re‐exploring the early relationship between teenage cigarette and e‐cigarette use using price and tax changes," Health Economics, John Wiley & Sons, Ltd., vol. 31(1), pages 137-153, January.
    3. Campus, Brooke & Fafard, Patrick & St. Pierre, Jessica & Hoffman, Steven J., 2021. "Comparing the regulation and incentivization of e-cigarettes across 97 countries," Social Science & Medicine, Elsevier, vol. 291(C).
    4. Friedson, Andrew I. & Rees, Daniel I., 2020. "Cigarette Taxes and Smoking in the Long Run," IZA Discussion Papers 13252, Institute of Labor Economics (IZA).
    5. Salvatore Barbaro & Nathalie Neu-Yanders, 2022. "Tobacco control and optimal taxation in a changing European market landscape," Working Papers 2204, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    6. Henry Saffer & Daniel Dench & Michael Grossman & Dhaval Dave, 2020. "E-cigarettes and adult smoking: Evidence from Minnesota," Journal of Risk and Uncertainty, Springer, vol. 60(3), pages 207-228, June.
    7. Darden, Michael E. & Hotchkiss, Julie L. & Melinda Pitts, M., 2021. "The dynamics of the smoking wage penalty," Journal of Health Economics, Elsevier, vol. 79(C).
    8. Wang, Yikai & Hagedorn, Marcus, 2020. "Differential Fiscal Policy Induced Innovations in Consumer Markets," Economics Discussion Papers 28425, University of Essex, Department of Economics.
    9. Hunt Allcott & Charlie Rafkin, 2020. "Optimal Regulation of E-cigarettes: Theory and Evidence," NBER Working Papers 27000, National Bureau of Economic Research, Inc.
    10. Michael F. Pesko & Charles J. Courtemanche & Johanna Catherine Maclean, 2020. "The effects of traditional cigarette and e-cigarette tax rates on adult tobacco product use," Journal of Risk and Uncertainty, Springer, vol. 60(3), pages 229-258, June.

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    JEL classification:

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

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