Interacting Effects of State Cigarette Taxes on Smoking Participation

James Bishop ()

No 1601, Economics Working Paper Series from Oklahoma State University, Department of Economics and Legal Studies in Business

Abstract: A state cigarette tax increase may deter some residents from smoking, but other residents may avoid the higher tax by purchasing cigarettes from another state. Using U.S. health survey micro data from 1999 to 2012, this paper measures how border-crossing opportunities affect the smoking deterrence achieved by a cigarette tax increase. I estimate by two-way fixed effects regression that a $1 state cigarette tax increase decreases the smoking rate by an additional 0.58 percentage points for each dollar of cigarette tax in the nearest lower-tax state. However, each successive $1 tax increase decreases the smoking rate by 0.38 fewer percentage points than the last. I show that the signs of these terms can be theoretically derived without parametric assumptions. I observe that, as both home and nearest lower taxes rose from 1999 to 2012, the mean effectiveness of a home state tax increase remained roughly constant over the period. My results imply that the lowest-tax states are those with the greatest power to reduce the national smoking rate.

Keywords: Cigarette Taxes; Smoking; Tax Avoidance; Border-crossing (search for similar items in EconPapers)
JEL-codes: H26 H73 I12 I18 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-10
New Economics Papers: this item is included in nep-hea, nep-law and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://business.okstate.edu/site-files/docs/ecls-working-papers/OKSWPS1601.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: Interacting effects of state cigarette taxes on smoking participation (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:okl:wpaper:1601

Access Statistics for this paper

More papers in Economics Working Paper Series from Oklahoma State University, Department of Economics and Legal Studies in Business Contact information at EDIRC.
Bibliographic data for series maintained by Harounan Kazianga ().