How Far to the Border?: The Extent and Impact of Cross-Border Casual Cigarette Smuggling

Michael Lovenheim

No 06-040, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: This paper uses micro-data on cigarette consumption from four waves of the CPS Tobacco Supplement to estimate cigarette demand models that incorporate the decision of whether to smuggle cigarettes across a state or Native American Reservation border. I find demand elasticities with respect to the home state price are indistinguishable from zero on average and vary significantly with the distance individuals live to a lower-price border. However, when smuggling incentives are eradicated, the price elasticity is negative, though still inelastic. I also estimate cross-border sales cause a modest increase in consumption, and between 13 and 25 percent of consumers purchase cigarettes in border localities in the CPS sample. The central implication of this study is, while cigarette taxes are ineffective at achieving the goals for which they were levied in many states, there are significant potential gains from price increases that are confounded by cross-border sales.

Keywords: Cigarette taxes; Cigarette smuggling; Cigarette demand; Tax evasion; Com- modity taxation (search for similar items in EconPapers)
JEL-codes: H26 H71 H73 I18 (search for similar items in EconPapers)
Date: 2007-08, Revised 2009-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www-siepr.stanford.edu/repec/sip/06-040.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www-siepr.stanford.edu:80 (nodename nor servname provided, or not known)

Related works:
Journal Article: How Far to the Border?: The Extent and Impact of Cross-Border Casual Cigarette Smuggling (2008)
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:sip:dpaper:06-040

Access Statistics for this paper

More papers in Discussion Papers from Stanford Institute for Economic Policy Research Contact information at EDIRC.
Bibliographic data for series maintained by Anne Shor ( this e-mail address is bad, please contact ).