E-Cigarettes and Adult Smoking: Evidence from Minnesota

33 Pages Posted: 13 Dec 2019

See all articles by Henry Saffer

Henry Saffer

National Bureau of Economic Research (NBER) - NY Office

Michael Grossman

National Bureau of Economic Research (NBER), NY Office; CUNY The Graduate Center - Department of Economics

Daniel Dench

City University of New York - CUNY Graduate Center

Dhaval Dave

Bentley University - Department of Economics; National Bureau of Economic Research (NBER) - NY Office

Multiple version iconThere are 2 versions of this paper

Date Written: December 12, 2019

Abstract

E-cigarettes use a battery powered heater to turn a liquid containing nicotine into a vapor. The vapor is inhaled by the user and is generally considered to be less harmful than the smoke from combustible cigarettes because the vapor does not contain the toxins that are found in tobacco smoke. Because e-cigarettes provide an experience that is very similar to smoking, they may be effective in helping smokers to quit, and thus the availability of e-cigarettes could increase quit rates. Alternatively, e-cigarettes may provide smokers with a method of bypassing smoking restrictions and prolong the smoking habit. There is very little causal evidence to date on how e-cigarette use impacts smoking cessation among adults. Although there is no federal tax on e-cigarettes, a few states have recently imposed heavy taxes on them. We provide some of the first evidence on how e-cigarette taxes impact adult smokers, exploiting the large tax increase in Minnesota. That state was the first to impose a tax on e-cigarettes by extending the definition of tobacco products to include e-cigarettes. This tax, which is 95% of the wholesale price, provides a plausibly exogenous deterrent to e-cigarette use. We utilize data from the Current Population Survey Tobacco Use Supplements from 1992 to 2015, in conjunction with a synthetic control difference-in-differences approach. We assess how this large tax increase impacted smoking cessation among adult smokers. Estimates suggest that the e-cigarette tax increased adult smoking and reduced smoking cessation in Minnesota, relative to the control group, and imply a cross elasticity of current smoking participation with respect to e-cigarette prices of 0.13. Our results suggest that in the sample period about 32,400 additional adult smokers would have quit smoking in Minnesota in the absence of the tax. If this tax were imposed on a national level about 1.8 million smokers would be deterred from quitting in a ten year period. The taxation of e-cigarettes at the same rate as cigarettes could deter more than 2.75 million smokers nationally from quitting in the same period. The public health benefits of not taxing e-cigarettes, however, must be weighed against effects of this decision on efforts to reduce vaping by youth.

Keywords: electronic cigarettes, adult smoking, excise taxes

JEL Classification: I12, I18

Suggested Citation

Saffer, Henry and Grossman, Michael and Dench, Daniel and Dave, Dhaval, E-Cigarettes and Adult Smoking: Evidence from Minnesota (December 12, 2019). Available at SSRN: https://ssrn.com/abstract=3503054 or http://dx.doi.org/10.2139/ssrn.3503054

Henry Saffer

National Bureau of Economic Research (NBER) - NY Office ( email )

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Michael Grossman (Contact Author)

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CUNY The Graduate Center - Department of Economics ( email )

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Daniel Dench

City University of New York - CUNY Graduate Center ( email )

New York, NY
United States

Dhaval Dave

Bentley University - Department of Economics ( email )

175 Forest Street
Waltham, MA 02452-4705
United States

National Bureau of Economic Research (NBER) - NY Office

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States

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