The Heterogeneous Geographic and Socioeconomic Incidence of Cigarette Taxes: Evidence from Nielsen Homescan Data
American Economic Journal: Economic Policy
vol. 4,
no. 4, November 2012
(pp. 169-98)
Abstract
We use Nielsen Homescan data to examine who bears the economic burden of cigarette taxes. We find cigarette taxes are less than fully passed through to consumer prices, suggesting consumers and producers split the excess burden of these taxes. Using information on consumer location, we show the availability of lower-tax goods across state borders creates significant differences in the pass-through rate. Tax avoidance opportunities also have a sizable effect on purchasing behavior by altering consumer search, prices paid and quantities purchased. Finally, we demonstrate that the incidence of cigarette taxes and the border effect varies by household income and education. (JEL D12, H22, H25, H26, H71, L66)Citation
Harding, Matthew, Ephraim Leibtag, and Michael F. Lovenheim. 2012. "The Heterogeneous Geographic and Socioeconomic Incidence of Cigarette Taxes: Evidence from Nielsen Homescan Data." American Economic Journal: Economic Policy, 4 (4): 169-98. DOI: 10.1257/pol.4.4.169Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- H22 Taxation and Subsidies: Incidence
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion
- H71 State and Local Taxation, Subsidies, and Revenue
- L66 Food; Beverages; Cosmetics; Tobacco; Wine and Spirits
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