Can Policy Changes Be Treated as Natural Experiments? Evidence from Cigarette Excise Taxes

44 Pages Posted: 17 May 2001

See all articles by Jeffrey D. Kubik

Jeffrey D. Kubik

Syracuse University - Department of Economics

John R. Moran

Penn State University

Date Written: May 2003

Abstract

An important issue in public policy analysis is the potential endogeneity of the policies under study. We examine the extent to which such political endogeneity biases estimates of behavioral parameters by identifying the elasticity of demand for cigarettes using the timing of state legislative elections as an instrument for changes in cigarette excise taxes. We find sizable differences between our estimates and those cited in Chaloupka and Warner (2000), which treat cigarette taxes as exogenous. Our results add to a growing body of evidence that policy changes may be codetermined with the outcomes they are thought to influence.

Keywords: Policy endogeneity, Taxes, Tobacco

JEL Classification: H0, I1

Suggested Citation

Kubik, Jeffrey D. and Moran, John R., Can Policy Changes Be Treated as Natural Experiments? Evidence from Cigarette Excise Taxes (May 2003). Available at SSRN: https://ssrn.com/abstract=269609 or http://dx.doi.org/10.2139/ssrn.269609

Jeffrey D. Kubik (Contact Author)

Syracuse University - Department of Economics ( email )

426 Eggers Hall
Syracuse, NY 13244-1020
United States
315-443-9063 (Phone)
315-443-1081 (Fax)

John R. Moran

Penn State University ( email )

116 Henderson Bldg.
Penn State University
University Park, PA 16802
United States

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