A Preliminary Contemporary Panel Data Analysis of the Consumption Impact of Cigarette Taxation

Abstract

The adverse health effects from cigarette smoking account for an estimated 400,000 deaths annually in the U.S. Given this circumstance, the present study has two objectives. First, using a panel data set for a very recent time frame, it seeks to investigate the impact of federal plus state cigarette excise taxes (along with the influence of other factors) on the aggregate consumption of cigarettes. The study adopts a five-year state-level panel data series spanning the period 2002 through 2006. Consistent with certain previous studies, the estimates in this study find that the higher the cigarette excise tax, the lower the aggregate volume of cigarettes consumed. However, this outcome does not address the practical problem of the substitution of high nicotine cigarettes for low nicotine cigarettes in light of a significant cigarette tax hike. This circumstance leads to the second objective of this study, namely, to formally propose a general form/template for a cigarette excise tax that is tied directly to each cigarette brand’s nicotine and tar content.

Does the Presence of Very Young Children and/or Older Minor-aged Children in the Home Reduce Cigarette Smoking? Panel Data Evidence for the United States

“…Cigarette smoking is measured in this study as the per capita number of packs of cigarettes smoked annually in each state ( CONSPC ). As suggested above, a number of previous studies have explored the determinants of cigarette consumption (Adda & Cornaglia, 2006; Anderson & Mellor, 2008; Cebula, 2010; Chaloupka & Warner, 2000; Connelly et al, 2009; Cox, 2010; DeCicca et al, 2002; Evans & Farrelly, 1998; Farrelly et al, 2004; Forster & Jones, 2001; Goel, 2008, 2009; Holt & Laury, 2002; Koch & Cebula, 1992; Lien & Evans, 2005; Lovenheim, 2008; Meier & Licari, 1997; Showalter, 1998; Tan, 2012; Tauras, 2006). Relevant contents of a few of these studies are briefly considered here.…”

“…Koch and Cebula (1992), Goel (2008) and Cebula (2010) argue and find that the per capita annual cigarette consumption in a state is an increasing function of the unemployment rate in that state ( UNEMP ), with the reasoning being that smoking, perhaps like alcohol, is a coping technique for many who are unemployed. It is also argued and/or found by Koch and Cebula (1992), Forster and Jones (2001), Anderson and Mellor (2008), Cebula (2010) and others that the greater the average educational attainment level among the adult population ( EDUC ) 2 and the higher the per capita income level ( PCI ), the lower the per capita annual consumption rate of cigarettes.…”

“…Elasticity estimates are all within the range of −0.4 to −0.7, indicating that, for example, an increase in the cigarette tax of, say, 10 per cent, would lead to a decrease in the volume of cigarettes consumed to between 4 per cent and 7 per cent. A more recent study by Cebula (2010) provides a log-log estimate focusing only on state-level cigarette excise cigarette taxes in which the state excise cigarette tax elasticity of cigarette smoking is found to be −0.2. Largely similar results to these studies are found in Meier and Licari (1997), Showalter (1998), Lovenheim (1998), Evans and Farrelly (1998), Forster and Jones (2001), Farrelly et al (2004), Lien and Evans (2005) and Connelly et al (2009).…”

“…Thus, Adda andCornaglia (2006, p. 1025) logically '…question the usefulness of excise cigarette taxes as a tool to regulate smoking intake, especially Furthermore, following the suggestion in Koch and Cebula (1992), as an additional related factor that can arguably be associated with higher cigarette taxation, this study also includes the percent of the population in each state that is in poverty (POV), with the argument being that, given the limited resources of the poor, higher cigarette prices resulting from higher cigarette excise taxes simply makes smoking a more unaffordable habit for at least some portion of those in poverty, ceteris paribus. Koch and Cebula (1992), Goel (2008) and Cebula (2010) argue and find that the per capita annual cigarette consumption in a state is an increasing function of the unemployment rate in that state (UNEMP), with the reasoning being that smoking, perhaps like alcohol, is a coping technique for many who are unemployed. It is also argued and/or found by Koch and Cebula (1992), Forster and Jones (2001), Anderson and Mellor (2008), Cebula (2010) and others that the greater the average educational attainment level among the adult population (EDUC) 2 and the higher the per capita income level (PCI), the lower the per capita annual consumption rate of cigarettes.…”

“…Cigarette smoking is also linked to myriad other adverse health effects, including heart disease (Centers for Disease Control and Prevention, 2009a; 2009b). The usual finding is that higher cigarette taxation leads to a reduction in the number of packs of cigarettes consumed, although other factors significantly influencing cigarette consumption have been identified (Cebula, 2010; Chaloupka, 2004; Chaloupka and Warner, 2000; Connelly et al, 2009; DeCicca et al, 2002; Evans and Farrelly, 1998; Farrelly et al, 2004; Forster and Jones, 2001; Goel, 2008, 2009; Holt and Laury, 2002; Koch and Cebula, 1992; Lien and Evans, 2005; Meier and Licari, 1997; Showalter, 1998; Tan, 2012; Tauras, 2006). The present study seeks to add to this rich literature, after accounting for cigarette excise, cigarette taxation and various other standard variables argued to potentially affect the level of cigarette consumption, by testing two heretofore effectively unstudied hypotheses.…”