Making a Smooth Exit? Menthol Bans and Cigarette Sales in Massachusetts

81 Pages Posted: 29 Jul 2022 Last revised: 17 Jun 2023

See all articles by Ali Goli

Ali Goli

University of Washington - Michael G. Foster School of Business

Simha Mummalaneni

University of Washington - Michael G. Foster School of Business

Pradeep K. Chintagunta

University of Chicago

Date Written: July 21, 2022

Abstract

Public health regulators in the United States are currently advocating for a ban on menthol-flavored cigarettes because they are believed to be more dangerous than traditional non-menthol cigarettes. However, these bans will have limited benefits if consumers are able to circumvent them. We examine this issue by evaluating the effects of a statewide menthol ban that was instituted by Massachusetts in 2020. An examination of store-level retail sales data from Massachusetts indicates that some demand shifted from menthols to non-menthols after the ban was instituted, thereby supporting the goals of the ban. However, broadening our analysis to neighboring states shows a sharp increase in menthol sales in areas just outside the Massachusetts border, thereby suggesting that many Massachusetts residents were able to get around the ban by engaging in cross-state shopping for menthol cigarettes. This cross-state shopping is damaging because it reduces the tax revenue for Massachusetts while also not yielding any positive public health benefits among its population. To provide policymakers with guidance regarding the benefits of alternative policies, we develop and estimate a structural model that accounts for heterogeneity in (i) prices across states; (ii) distances from state borders; and (iii) menthol shares across Massachusetts. We show that a statewide menthol tax might be preferable over either a statewide menthol ban or a national ban because it yields sizable reductions in smoking activity while also generating up to 14% in additional tax revenue.

Keywords: Tobacco marketing, Public policy, Menthol cigarettes, Cross-border shopping, Structural models

JEL Classification: D04, L38, M38, M31

Suggested Citation

Goli, Ali and Mummalaneni, Simha and Chintagunta, Pradeep K., Making a Smooth Exit? Menthol Bans and Cigarette Sales in Massachusetts (July 21, 2022). Available at SSRN: https://ssrn.com/abstract=4169265 or http://dx.doi.org/10.2139/ssrn.4169265

Ali Goli (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Simha Mummalaneni

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Pradeep K. Chintagunta

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)

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