Price Isn't Everything: Behavioral Response Around Changes in Sin Taxes

49 Pages Posted: 17 Jun 2019 Last revised: 6 Jul 2022

See all articles by Alex Rees-Jones

Alex Rees-Jones

Cornell University - Department of Economics; National Bureau of Economic Research (NBER)

Kyle Rozema

Washington University in St. Louis - School of Law

Date Written: June 2019

Abstract

In traditional economic models, taxes change behavior by changing prices. In empirical analyses, factors other than price are thought to be relevant, but any non-price factors are usually assumed to be held constant as taxes vary. We contend that violations of this assumption are expected when laws are passed changing sin taxes. In support of this claim, we document that state-level cigarette tax increases are concomitant with increases in anti-smoking appropriations, media coverage on smoking, lobbying efforts, and place-based smoking restrictions. The influence of these non-price factors is easily confused with price effects, and we find evidence suggesting that controlling for them substantially reduces the estimated demand responsivity to the tax itself.

Suggested Citation

Rees-Jones, Alex and Rozema, Kyle, Price Isn't Everything: Behavioral Response Around Changes in Sin Taxes (June 2019). NBER Working Paper No. w25958, Available at SSRN: https://ssrn.com/abstract=3405145

Alex Rees-Jones (Contact Author)

Cornell University - Department of Economics ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.alexreesjones.com

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kyle Rozema

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

Campus Box 1120
St. Louis, MO 63130
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
10
Abstract Views
333
PlumX Metrics