Tax Changes and Cigarette Prices

Sumner, Michael; Ward, Robert

doi:10.1086/261034

Cited by 38 publications

(21 citation statements)

References 1 publication

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“…Possible reasons for different findings include control variables, data sources, sample periods, and estimation strategies. Sumner and Ward (1981) use a firstdifferencing identification strategy with state-level price and tax data from 1954 to 1976 from the Tobacco Tax Council. Ashenfelter and Sullivan (1987) use TBT data from 1955 to 1982 and their identification strategy includes the use of nonparametric tests.…”

Section: Resultsmentioning

confidence: 99%

The Effect of Cigarette Taxation on Prices

Sullivan

Dutkowsky

2012

Public Finance Review

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This article combines new, author-collected tax data with data both from the American Chamber of Commerce Researchers Association cost of living index and from the Tax Burden on Tobacco to measure the relative effects of city, county, and state excise cigarette taxation on cigarette prices. The results indicate that a $1 increase in the state excise cigarette tax increases cigarette prices between $1.10 and $1.14, but that a $1 increase in a city- or county-level excise tax increases prices by $1.07. These findings are similar between premium and generic cigarette brands. Additionally, urban areas located near states with lower cigarette taxes tend to have lower cigarette prices relative to urban areas located near states with the same or higher tax rates.

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Section: Resultsmentioning

confidence: 99%

The Effect of Cigarette Taxation on Prices

Sullivan

Dutkowsky

2012

Public Finance Review

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“…high quality) cigarettes increases in the presence of larger per-unit taxes. Barzel, Johnson (1978) and Sumner and Ward (1981) conduct a "mixed test" of the two predictions, namely whether the quantityweighted average price (across all brands) increases by more than the per-unit tax; however, these studies are inconsistent in their findings. A general shortcoming of previous work is that analyses have been limited by the absence of product quality measures or by the unavailability of detailed brand-level data.…”

Section: Introductionmentioning

confidence: 99%

Tax Incidence When Quality Matters: Evidence from the Beer Market

Rojas¹,

Shi²

2011

Journal of Agricultural &Amp; Food Industrial Organization

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What are the effects of a per-unit tax on the sales of a good? The answer in standard economics textbooks is a reduction in quantity and an increase in price. However, the homogeneous-product assumption in such treatments is not always correct because the taxed product is frequently sold under numerous differentiated brands. In general, quantity and price adjustments to a perunit tax increase may vary differentially by brand, which implies that tax incidence requires a more thorough analysis than the standard one. In this paper, we test a popular theoretical prediction that the effects of a per-unit tax on sales may be different for low-quality brands than for high-quality brands. We exploit two exogenous variations on per-unit charges (excise taxes and shipping costs) in the beer industry to study if quality is an important determinant of equilibrium quantity, prices and advertising expenditures. We find that, when faced with higher perunit charges, the equilibrium price and quantity of a brand are usually positively associated with its quality level; similarly, higher per-unit charges appear to provide firms with an incentive to shift advertising effort towards brands of higher quality. We discuss implications for public policy and firm profitability.

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“…The taxation of cigarettes has been used to learn about each of these separately. (See Barzel, 1976;Johnson, 1978;Sumner and Ward, 1981 on tax incidence.…”

Section: Introductionmentioning

confidence: 99%

“…result is interpreted as providing further support for the quality model. Sumner and Ward (1981) question this interpretation on the grounds of implausibility. They ask what is the nature of the quality change which is made to the product in response to a tax change and point out that manufacturers do not produce a different product for the one state levying the ad valorem tax.…”

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confidence: 99%

Estimating tax incidence, market power and market conduct: The European cigarette industry

Delipalla

O’Donnell

2001

International Journal of Industrial Organization

135

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Recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under-shifted onto consumers in the presence of imperfect competition. These results are used to derive a method of estimating market power and conduct. An application is made to the European cigarette industry. Previous empirical comparison of the price effects of ad valorem and specific taxes is limited. For a group of countries with broadly similar cigarette industries, there is evidence of undershifting of both taxes, with the specific tax having a significantly greater impact on price. The extremes of both perfect competition and monopoly can be rejected. Behaviour is no less competitive than the equivalent of Cournot. JEL Classification: H22, L13, L66

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Tax Changes and Cigarette Prices

Cited by 38 publications

References 1 publication

The Effect of Cigarette Taxation on Prices

The Effect of Cigarette Taxation on Prices

Tax Incidence When Quality Matters: Evidence from the Beer Market

Estimating tax incidence, market power and market conduct: The European cigarette industry

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