Revisiting the Effects of Cigarette Taxes on Smoking Outcomes

Vinish Shrestha ()
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Vinish Shrestha: Department of Economics, Towson University

No 2022-02, Working Papers from Towson University, Department of Economics

Abstract: This study reassesses the efficacy of cigarette taxation in curtailing smoking by leveraging recent advancements in the difference-in-differences (DiD) literature to account for hetero- geneous treatment effects. Using data from the Behavioral Risk Factor Surveillance System Selected Metropolitan/Micropolitan Area Risk Trend (BRFSS SMART) for the sample periods 2004-2010 and 2015-2020, the study reveals three key findings. Firstly, the TWFE estimate for the 2004-2010 sample is only 48% of the average treatment effect on the treated (ATT) estimate obtained through the DiD framework. Secondly, event-study type estimates demonstrate a gradual increase in magnitude following the treatment year, highlighting dynamic treatment effects overlooked by the TWFE estimate. Third, the ATT estimate for the 2015-2020 sample is approximately 66% of the ATT estimate for the 2004-2010 sample. Overall, the study underscores the potential bias towards zero in elasticity estimates when relying solely on TWFE models.

Keywords: Cigarette taxation; Difference-in-Differences; Treatment heterogeneity; Dynamic treatment effects; Elasticity. (search for similar items in EconPapers)
JEL-codes: B23 D00 H20 I10 I18 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2022-10, Revised 2024-06
New Economics Papers: this item is included in nep-hea and nep-pub
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