Behavioral Responses to Taxation: Cigarette Taxes and Food Stamp Take-Up

53 Pages Posted: 30 Mar 2015

See all articles by Kyle Rozema

Kyle Rozema

Washington University in St. Louis - School of Law

Nicolas R. Ziebarth

Cornell University

Abstract

This paper investigates a previously unexplored behavioral response to taxation: whether smokers compensate for higher cigarette taxes by enrolling in food stamps. First, we show theoretically that increases in cigarette taxes can induce food stamp take-up of non-enrolled, eligible smoking households. Then, we study the theoretical predictions empirically by exploiting between and within-household variation in food stamp enrollment from the Current Population Survey as well as data from the Consumer Expenditure Survey. The empirical evidence strongly supports the model predictions. Higher cigarette taxes increase the probability that low-income smoking households take-up food stamps.

Keywords: cigarette taxes, food stamp take-up, tax pass-through rate, unintended consequences

JEL Classification: L66, H21, H23, H26, H71, I18

Suggested Citation

Rozema, Kyle and Ziebarth, Nicolas R., Behavioral Responses to Taxation: Cigarette Taxes and Food Stamp Take-Up. Available at SSRN: https://ssrn.com/abstract=2586410 or http://dx.doi.org/10.2139/ssrn.2586410

Kyle Rozema (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States

Nicolas R. Ziebarth

Cornell University ( email )

Ithaca, NY
United States

HOME PAGE: http://www.human.cornell.edu/bio.cfm?netid=nrz2

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