Unintended Consequences of Cigarette Prohibition, Regulation, and Taxation

52 Pages Posted: 15 Jul 2015

See all articles by Jonathan Kulick

Jonathan Kulick

Marron Institute

James E. Prieger

Pepperdine University - School of Public Policy

Mark Kleiman

New York University (NYU) - Marron Institute of Urban Management

Date Written: July 13, 2015

Abstract

Laws that prohibit, regulate, or tax cigarettes can generate illicit markets for tobacco products. Illicit markets both reduce the efficacy of policies intended to improve public health and create harms of their own. Enforcement can reduce evasion but creates additional harms, including incarceration and violence. There is strong evidence that more enforcement in illicit drug markets can spur violence. The presence of licit substitutes, such as electronic cigarettes, has the potential to greatly reduce the size of illicit markets. We present a model demonstrating why enforcement can increase violence, show that states with higher tobacco taxes have larger illicit markets, and apply the findings to discussion of public policy toward a potential ban on menthol cigarettes. The social calculus involved in determining public policy toward tobacco cigarettes should include the harms from both consumption and control. We conclude by highlighting areas where more research is needed for effective policymaking.

Keywords: black markets, illicit markets, illicit trade in tobacco, smuggling, contraband, counterfeit goods, enforcement, violence, violent crime

JEL Classification: K42, K32, H20, I18

Suggested Citation

Kulick, Jonathan and Prieger, James E. and Kleiman, Mark, Unintended Consequences of Cigarette Prohibition, Regulation, and Taxation (July 13, 2015). Available at SSRN: https://ssrn.com/abstract=2630411 or http://dx.doi.org/10.2139/ssrn.2630411

Jonathan Kulick

Marron Institute ( email )

196 Mercer St.
New York, NY 10012
United States

James E. Prieger (Contact Author)

Pepperdine University - School of Public Policy ( email )

24255 Pacific Coast Highway
Malibu, CA 90263
United States
3105067150 (Phone)
3105067494 (Fax)

HOME PAGE: http://sites.google.com/a/pepperdine.edu/jprieger/

Mark Kleiman

New York University (NYU) - Marron Institute of Urban Management ( email )

196 Mercer St.
New York, NY 10012
United States

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