Internet Diffusion and Implications for Taxation: Evidence from U.S. Cigarette Sales

Policy & Internet, 4(1) February 2012: 1–15

Posted: 7 Oct 2014

See all articles by Rajeev K. Goel

Rajeev K. Goel

Illinois State University - Department of Economics

Michael A Nelson

Independent

Date Written: 2012

Abstract

Using state level U.S. data from 1994-2009, this research examines the impact of the Internet on cigarette demand and discusses resulting implications for tax policy. Results show that the Internet increases the demand price elasticity of cigarettes, which limits the ability of governments to generate additional tax revenues through cigarette tax increases. Further, the smuggling of cigarettes, both across domestic and international borders, remains significant, and tobacco producers and Indian casinos undermine efforts to lower cigarette sales.

Keywords: Internet; taxation; cigarettes; smuggling

JEL Classification: D12, L86

Suggested Citation

Goel, Rajeev K. and Nelson, Michael A, Internet Diffusion and Implications for Taxation: Evidence from U.S. Cigarette Sales (2012). Policy & Internet, 4(1) February 2012: 1–15 , Available at SSRN: https://ssrn.com/abstract=2506133

Rajeev K. Goel (Contact Author)

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States

Michael A Nelson

Independent ( email )

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