Working Paper: NBER ID: w15942
Authors: Philip Decicca; Donald S. Kenkel; Feng Liu
Abstract: We conduct an empirical study of the impact of consumer price-search on the shifting of cigarette excise taxes to consumer prices. We use novel data on the prices smokers report actually paying for cigarettes. We document substantial price dispersion. We find that cigarette taxes are shifted at lower rates to the prices paid by consumers who undertake more price search - carton buyers, and especially, smokers who buy cartons of cigarettes in a state other than their state of residence. We also find suggestive evidence that taxes are shifted at slightly higher rates to the prices paid by non-daily smokers, less addicted smokers, and smokers of light cigarettes.
Keywords: cigarette taxes; consumer price search; tax shifting; price dispersion
JEL Codes: H22; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cigarette excise taxes (H29) | Prices paid by consumers who engage in more price search (D11) |
| Cigarette excise taxes (H29) | Prices paid by nondaily smokers (Q31) |
| Cigarette excise taxes (H29) | Prices paid by less addicted smokers (D49) |
| Cigarette excise taxes (H29) | Prices paid by smokers of light cigarettes (D49) |