The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data

69 Pages Posted: 1 Jun 2021 Last revised: 6 Sep 2022

See all articles by Chad D. Cotti

Chad D. Cotti

University of Wisconsin - Oshkosh

Charles Courtemanche

University of Kentucky

Catherine Maclean

Temple University

Erik Nesson

Ball State University - Department of Economics

Michael Pesko

Georgia State University - Department of Economics

Nathan Tefft

Amazon

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Date Written: August 25, 2022

Abstract

We estimate the effect of e-cigarette tax rates on e-cigarette prices, e-cigarette sales, and sales of other tobacco products using NielsenIQ Retail Scanner data from 2013 to 2019. We find that 90% of e-cigarette taxes are passed on to consumer retail prices. We then estimate reduced form and instrumental variables regressions to examine the effects of e-cigarette and cigarette taxes and prices on sales. We calculate an e-cigarette own-price elasticity of -2.2 and particularly large elasticity of demand for flavored e-cigarettes. Further, we document a cigarette own-price elasticity of -0.4 and positive cross-price elasticities of demand between e-cigarettes and cigarettes, suggesting economic substitution.

Keywords: taxation, e-cigarettes, cigarettes, pass-through rate, regulation

JEL Classification: H2; I1

Suggested Citation

Cotti, Chad D. and Courtemanche, Charles and Maclean, Catherine and Nesson, Erik and Pesko, Michael and Tefft, Nathan, The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data (August 25, 2022). Andrew Young School of Policy Studies Research Paper Series Forthcoming, Journal of Health Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3856776 or http://dx.doi.org/10.2139/ssrn.3856776

Chad D. Cotti

University of Wisconsin - Oshkosh ( email )

800 Algoma Blvd
Oshkosh, WI WI 54901
United States

Charles Courtemanche

University of Kentucky ( email )

Catherine Maclean

Temple University ( email )

Philadelphia, PA 19122
United States

Erik Nesson

Ball State University - Department of Economics ( email )

Muncie, IN 47306-0340
United States

Michael Pesko (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

Nathan Tefft

Amazon

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