Just passing through: the effect of the Master Settlement Agreement on estimated cigarette tax price pass-through

Dean R. Lillard and Andrew Sfekas

Applied Economics Letters, 2013, vol. 20, issue 4, 353-357

Abstract: In 1998, cigarette manufacturers and state attorneys general in the United States settled a group of lawsuits in an agreement known as the Master Settlement Agreement (MSA). Among the provisions of this agreement were a set of mandated escrow payments to the states that would be based on cigarette sales. The result of these provisions is that the apparent relationship between taxes and prices changed substantially following implementation of the MSA. This article estimates whether the MSA escrow amounts are reflected in prices and compares the pass-through rate of state and federal cigarette taxes only and the rate when one adds escrow payments. We find much different pass-through rates for the two measures. State and federal taxes are not fully passed to smokers. In years that escrow payments were made, cigarette prices increased by more than the sum of the state and federal taxes and the escrow payments.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2012.705422 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:taf:apeclt:v:20:y:2013:i:4:p:353-357

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2012.705422

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().