Working Paper: NBER ID: w18326
Authors: Kevin Callison; Robert Kaestner
Abstract: There is a general consensus among policymakers that raising tobacco taxes reduces cigarette consumption. However, evidence that tobacco taxes reduce adult smoking is relatively sparse. In this paper, we extend the literature in two ways: using data from the Current Population Survey Tobacco Use Supplements we focus on recent, large tax changes, which provide the best opportunity to empirically observe a response in cigarette consumption, and employ a novel paired difference-in-differences technique to estimate the association between tax increases and cigarette consumption. Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small and not usually statistically significant. Our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases, on the order of 100%, to decrease adult smoking by as much as 5%.
Keywords: tobacco taxes; adult smoking; cigarette consumption; public health; difference-in-differences
JEL Codes: I12; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cigarette tax increase (H29) | Decrease in smoking participation (J26) |
| Cigarette tax increase (H29) | Decrease in smoking intensity (L66) |
| Cigarette tax increase (H29) | Insufficient justification for significant reduction in consumption (E21) |