Do Higher Tobacco Taxes Reduce Adult Smoking? New Evidence of the Effect of Recent Cigarette Tax Increases on Adult Smoking

18 Pages Posted: 20 Nov 2013

See all articles by Kevin Callison

Kevin Callison

Grand Valley State University - Department of Economics

Robert Kaestner

University of Chicago; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2014

Abstract

There is a general consensus among policymakers that raising tobacco taxes reduces cigarette consumption. However, evidence that tobacco taxes reduce adult smoking is relatively sparse. In this paper, we extend the literature in two ways: using data from the Current Population Survey Tobacco Use Supplements we focus on recent, large tax changes, which provide the best opportunity to empirically observe a response in cigarette consumption, and employ a novel paired difference‐in‐differences technique to estimate the association between tax increases and cigarette consumption. Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small, and not usually statistically significant. Our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases, on the order of 100%, to decrease smoking by as much as 5%.

JEL Classification: I18, I12

Suggested Citation

Callison, Kevin and Kaestner, Robert, Do Higher Tobacco Taxes Reduce Adult Smoking? New Evidence of the Effect of Recent Cigarette Tax Increases on Adult Smoking (January 2014). Economic Inquiry, Vol. 52, Issue 1, pp. 155-172, 2014, Available at SSRN: https://ssrn.com/abstract=2357232 or http://dx.doi.org/10.1111/ecin.12027

Kevin Callison

Grand Valley State University - Department of Economics ( email )

478c DeVos Center
Grand Rapids, MI 49504
United States

Robert Kaestner (Contact Author)

University of Chicago ( email )

1155 East 60th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

5 Hanover Square 16th floor
New York, NY 10004
United States

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