Cigarette Tax Pass-Through by Product Characteristics: Evidence from Nielsen Retail Scanner Data

38 Pages Posted: 6 Nov 2015

See all articles by Xiaojin Wang

Xiaojin Wang

University of Kentucky - College of Agriculture - Department of Agricultural Economics

Yuqing Zheng

University of Kentucky - College of Agriculture - Department of Agricultural Economics

Michael R. Reed

University of Kentucky - College of Agriculture - Department of Agricultural Economics

Chen Zhen

University of Georgia - Department of Agricultural & Applied Economics

Date Written: November 4, 2015

Abstract

We used Nielsen store-level scanner data on cigarette prices from convenience stores over the period 2011-2012 to measure the incidence of cigarette excise taxes. We found that cigarette taxes were more than fully passed through to retail prices on average, suggesting consumers pay excess burden and market power exists in the cigarette industry. Utilizing information on the attributes of cigarette products, we demonstrated that tax incidence varied by brand and package size: pass-through rates for premium brands and carton-packaged cigarettes are higher than those for discount brands and cigarettes in packs, respectively, indicating possibilities of different demand elasticities across product tiers.

Keywords: cigarette, excise tax, tax incidence, Nielsen ScanTrack

JEL Classification: H22, H25, H71, L66

Suggested Citation

Wang, Xiaojin and Zheng, Yuqing and Reed, Michael R. and Zhen, Chen, Cigarette Tax Pass-Through by Product Characteristics: Evidence from Nielsen Retail Scanner Data (November 4, 2015). Available at SSRN: https://ssrn.com/abstract=2686274

Xiaojin Wang

University of Kentucky - College of Agriculture - Department of Agricultural Economics ( email )

Lexington, KY 40546
United States

Yuqing Zheng (Contact Author)

University of Kentucky - College of Agriculture - Department of Agricultural Economics ( email )

Lexington, KY 40546
United States

Michael R. Reed

University of Kentucky - College of Agriculture - Department of Agricultural Economics ( email )

308 Charles E. Barnhart Bldg.
Lexington, KY 40546-0276
United States
859-257-7259 (Phone)
859-323-1913 (Fax)

Chen Zhen

University of Georgia - Department of Agricultural & Applied Economics ( email )

Athens, GA 30602-7509
United States

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