State Tax Changes and Quasi-Experimental Price Elasticities of U.S. Cigarette Demand: An Update

Abstract

This paper uses 336 state tax changes across the U.S. spanning 42 years (1956–1997) to provide an updated look at the quasi-experimental price elasticities of cigarette demand. It also studies the sensitivity of these elasticity estimates to changes in the cigarette market over time as well as their sensitivity to border-effect purchases. Besides replicating earlier findings, the results show a downward trend in these elasticities over time and sensitivity to border effect purchases. Policy implications are discussed.