Revisiting the effects of cigarette taxation on smoking outcomes

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

Empirical Economics, 2025, vol. 68, issue 3, No 14, 1429-1475

Abstract: 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 heterogeneous 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 toward 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)
Date: 2025
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DOI: 10.1007/s00181-024-02674-0

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