Who Pays Cigarette Taxes? the Impact of Consumer Price Search

28 Pages Posted: 3 May 2010 Last revised: 25 Jul 2010

See all articles by Philip DeCicca

Philip DeCicca

McMaster University - Department of Economics; Ball State--Department of Economics

Donald Kenkel

Cornell University - Department of Policy Analysis & Management (PAM); National Bureau of Economic Research (NBER)

Feng Liu

Shanghai University of Finance and Economics; The Chinese University of Hong Kong, Shenzhen

Date Written: April 2010

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.

Suggested Citation

DeCicca, Philip and Kenkel, Donald and Liu, Feng, Who Pays Cigarette Taxes? the Impact of Consumer Price Search (April 2010). NBER Working Paper No. w15942. Available at SSRN: https://ssrn.com/abstract=1598058

Philip DeCicca (Contact Author)

McMaster University - Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

Ball State--Department of Economics ( email )

United States

Donald Kenkel

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States
607-255-2594 (Phone)
607-255-4071 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Feng Liu

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

The Chinese University of Hong Kong, Shenzhen ( email )

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