Cigarette smuggling mitigates the public health benefits of cigarette taxes

R.Andrew Luccasen, R. Morris Coats and G. Karahan

Applied Economics Letters, 2005, vol. 12, issue 12, 769-773

Abstract: Merriman (2002) argues that cigarette smuggling does not reduce the health benefits of cigarette taxation, because, in addition to the purchase price of smuggled cigarettes, those purchasing smuggled cigarettes have to pay a higher inconvenience price for their cigarettes, so that smuggled cigarettes no more than replace legal cigarettes. Here, it is argued that Merriman is incorrect, that while smuggled cigarettes have the same full cost as legal cigarettes at the margin, they have a lower inframarginal full price, which has the effect of increasing smoking behaviour.

Date: 2005
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DOI: 10.1080/13504850500278264

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