Have Cigarette Taxes Lost Their Bite? New Estimates of the Relationship between Cigarette Taxes and Youth Smoking

Solon G., Haider S.J., Wooldridge J.M.

Neumark D., Salas J.M., Wascher W.

The authors revisit the long-running minimum wage–employment debate to assess new studies claiming that estimates produced by the panel data approach commonly used in recent minimum wage research are flawed by that approach's failure to account for spatial heterogeneity. The new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. The authors explore the ability of the new research designs to isolate reliable identifying information, and they test the designs' untested assumptions about the construction of better control groups. Their analysis reveals problems with the new research designs. Moreover, using methods that let the data identify the appropriate control groups, their results reaffirm the evidence of disemployment effects, with teen employment elasticities near −0.15. This evidence, they conclude, still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others.

Guindon G.E.

The benefits of preventing smoking onset are well known. Existing reviews clearly demonstrate that increasing the prices of tobacco products reduces smoking prevalence and cigarette consumption. However, only a small number of studies included in existing reviews have examined smoking onset (the transition between never smoking and smoking). Moreover, existing reviews provide limited quality assessment of the data and methods utilised. This paper systematically searches for and critically reviews studies that examine the impact of tobacco prices or taxes on smoking onset. Most studies reviewed have important methodological limitations, including recall bias; a general failure to apply diagnostic tests, to discuss the choice of estimators and distributional assumptions and to conduct sensitivity analysis; and a reliance on empirical approaches that are methodologically weak. On the whole, existing studies do not provide strong evidence that tobacco prices or taxes affect smoking onset.

Lillard D.R., Molloy E., Sfekas A.

We show, with three longitudinal datasets, that cigarette taxes and prices affect smoking initiation decisions. Evidence from longitudinal studies is mixed but generally find that initiation does not vary with price or tax. We show that the lack of statistical significance partly results because of limited policy variation in the time periods studied, truncated behavioral windows, or mis-assignment of price and tax rates in retrospective data (which occurs when one has no information about respondents' prior state or region of residence). Our findings highlight issues relevant to initiation behavior generally, particularly those for which individuals' responses to policy changes may be noisy or small in magnitude.

Bader P., Boisclair D., Ferrence R.

Tobacco taxation is an essential component of a comprehensive tobacco control strategy. However, to fully realize the benefits it is vital to understand the impact of increased taxes among high-risk subpopulations. Are they influenced to the same extent as the general population? Do they need additional measures to influence smoking behavior? The objectives of this study were to synthesize the evidence regarding differential effects of taxation and price on smoking in: youth, young adults, persons of low socio-economic status, with dual diagnoses, heavy/long-term smokers, and Aboriginal people. Using a better practices approach, a knowledge synthesis was conducted using a systematic review of the literature and an expert advisory panel. Experts were involved in developing the study plan, discussing findings, developing policy recommendations, and identifying priorities for future research. Most studies found that raising cigarette prices through increased taxes is a highly effective measure for reducing smoking among youth, young adults, and persons of low socioeconomic status. However, there is a striking lack of evidence about the impact of increasing cigarette prices on smoking behavior in heavy/long-term smokers, persons with a dual diagnosis and Aboriginals. Given their high prevalence of smoking, urgent attention is needed to develop effective policies for the six subpopulations reviewed. These findings will be of value to policy-makers and researchers in their efforts to improve the effectiveness of tobacco control measures, especially with subpopulations at most risk. Although specific studies are needed, tobacco taxation is a key policy measure for driving success.

Nonnemaker J.M., Farrelly M.C.

Existing evidence for the role of cigarette excise taxes and prices as significant determinants of youth smoking initiation is mixed. A few studies have considered the possibility that the impact of cigarette taxes and prices might differ by gender or race/ethnicity. In this paper, we address the role of cigarette taxes and prices on youth smoking initiation using the National Longitudinal Survey of Youth 1997 cohort and discrete-time survival methods. We present results overall and by gender, race/ethnicity, and gender by race/ethnicity. We examine initiation over the age range during which youth are most at risk of initiation and over a period in which substantial changes have occurred in tax and price. The result for cigarette excise taxes is small and mixed across alternative specifications, with the effect strongest for black youth. Cigarette prices are more consistently a significant determinant of youth smoking initiation, especially for black youth.

Chaloupka F.J., Straif K., Leon M.E.

Objective Over 20 experts on economics, epidemiology, public policy and tobacco control were asked by the International Agency for Research on Cancer (IARC) to evaluate the strength of the available evidence on the effects of tax and price policies to prevent and reduce tobacco use.Methods Draft papers presenting and assessing the evidence on the following topics were developed by the experts in an 8-month period prior to the meeting: tobacco industry pricing strategies and tax related lobbying; tax, price and aggregate demand for tobacco; tax, price and adult tobacco use, use among young people and use among the poor; tax avoidance and tax evasion; and the economic and health impact of tobacco taxation. Subsequently, papers were peer reviewed, revised and resubmitted for final discussion at a 6-day meeting at IARC in Lyon, France, where a consensus evaluation of 18 concluding statements using the pre-established criteria of the IARC Cancer Prevention Handbooks took place. Studies published (or accepted for publication) in the openly available scientific literature were the main source of evidence for the review and evaluation; other types of publications were included when appropriate.Results In support of 12 of the 18 conclusions, the experts agreed that there was sufficient evidence of effectiveness of increased tobacco excise taxes and prices in reducing overall tobacco consumption and prevalence of tobacco use and improvement of public health, including by preventing initiation and uptake among young people, promoting cessation among current users and lowering consumption among those who continue to use. For the remaining six concluding statements the evidence was strong (four statements) or limited (two statements).Conclusions The evidence presented and assessed in IARC Handbook volume 14 documents the effectiveness of tax and price policies in the control of tobacco use and improvement of public health.

DeCicca P., Kenkel D., Mathios A.

Many policy makers continue to advocate and adopt cigarette taxes as a public health measure. Most previous individual-level empirical studies of cigarette demand are essentially static analyses of the relationship between the level of taxes and smoking behavior at a point in time. In this study, we use longitudinal data to examine the dynamics of young adults' decisions about smoking initiation and cessation. We develop a simple model to highlight the distinctions between smoking initiation, cessation, and participation. We show that because smoking participation reflects past decisions regarding initiation and cessation, the price elasticity of smoking participation is a weighted average of corresponding initiation and cessation elasticities, a finding that applies more broadly to other addictive substances as well. The paper's remaining contributions are empirical. We use data from the 1992 wave of the National Education Longitudinal Study, when most of the cohort were high school seniors, and data from the 2000 wave, when they were about 26 years old. The results show that the distinction between initiation and cessation is empirically useful. We also contribute new estimates on the tax-responsiveness of young adult smoking, paying careful attention to the possibility of bias if hard-to-observe differences in anti-smoking sentiment are correlated with state cigarette taxes. We find no evidence that higher taxes prevent smoking initiation, but some evidence that higher taxes are associated with increased cessation.

Carpenter C., Cook P.J.

Several studies have examined the effects of state cigarette tax increases on youth substance use over the 1990s, with most – but not all – finding that higher taxes reduce youth consumption of tobacco. We advance the literature by using data from the 1991 to 2005 waves of the national Youth Risk Behavior Surveys (YRBS), providing information on over 100,000 high school age youths. We also are the first to make use of hundreds of independently fielded state and local versions of the YRBS, reflecting data from over 750,000 youths. Importantly, these data are to our knowledge the only sources of relevant information on youth smoking that were explicitly designed to be representative of the sampled state or locality. We estimate two-way fixed effects models of the effect of state cigarette taxes on youth smoking, controlling for survey demographics and area and year fixed effects. Our most consistent finding is that – contrary to some recent research – the large state tobacco tax increases of the past 15 years were associated with significant reductions in smoking participation and frequent smoking by youths. Our price elasticity estimates for smoking participation by high school youths are generally smaller than previous cross-sectional approaches but are similar to recent quasi-experimental estimates.

Fix B.V., Zambon M., Higbee C., Cummings K.M., Alford T., Hyland A.

Objective. To assess trends and correlates of youth cigarette purchasing behavior on the Internet. Methods. In 2000–2001, Roswell Park Cancer Institute conducted a survey asking 7019 ninth grade students in Erie and Niagara Counties in New York State about their tobacco use and purchasing habits, including use of the Internet to buy cigarettes. The 2004–2005 survey is a replication of the 2000–2001 survey. Both surveys used an anonymous, self-administered questionnaire survey. These data were combined in order to examine trends in youth smoking behavior. Results. Students surveyed in 2004–2005 were 2.6 times more likely (95% CI: 1.5, 4.6) to have purchased cigarettes over the Internet in the 30 days prior to the survey than those surveyed in 2001 (5.2% to 1.6%); however, the intention to use the Internet as a cigarette source in the future did not change between survey periods. Conclusion. Youth online cigarette purchasing has increased but intention to use the Internet to purchase cigarettes in the future has remained the same, suggesting that this trend may be reaching a plateau. Recent public efforts to reduce online cigarette sales will need to be evaluated in order to determine which policy or combination of policies are most effective.

Chou S., Grossman M., Saffer H.

We address Gruber and Frakes's criticisms that (1) the state excise tax on a package of cigarettes is a more exogenous measure of the cost of cigarettes than the state-specific price of a package of cigarettes and (2) that it is preferable to control for the effects of unmeasured variables that vary over time with the use of time dummies instead of with a quadratic time trend. We also point out that our specification of the cost effect differs from theirs because we allow it to be nonlinear while they force it to be linear.

Gallet C.A., List J.A.

Estimating elasticities of cigarette demand has become commonplace amongst economists and policymakers. Synthesizing the various elasticities into a coherent message is quite challenging, however, as the point estimates are obtained using quite disparate modeling techniques and data. In this study, we perform a meta-analysis to explore factors that influence variations within and across studies. Empirical results suggest that demand specification, data issues, and estimation methodology have varying degrees of influence on reported estimates of price, income, and advertising elasticities.

Abrams S.M., Hyland A., Cummings K.M.

DeCicca P., Kenkel D., Mathios A.

This paper reexamines whether higher cigarette taxes will substantially reduce youth smoking. We study the impact of taxes during exactly the period in adolescence in which most smokers start their habits. We find weak or nonexistent tax effects in models of the onset of smoking between eighth and twelfth grades, models of the onset of heavy smoking between eighth and twelfth grades, and discrete‐time hazard models that include state fixed effects. We also provide a new perspective on the relationship between smoking and schooling: students who eventually drop out of school are already more likely to smoke in the eighth grade.

Unger J.B.

OBJECTIVE To assess the prevalence of, and demographic and smoking behaviour correlates of, attempting to purchase cigarettes via the internet among adolescent current smokers.METHODS A representative sample of 17 181 10th and 12th grade California students completed a written questionnaire on tobacco related attitudes and behaviour during the 1999-2000 school year. Logistic regression analyses were used to determine the variables associated with attempting to purchase cigarettes on the internet.RESULTS Among youth under 18 years of age who were current smokers (n = 1689), 2.2% (95% confidence interval 1.5% to 2.9%) reported attempting to purchase cigarettes on the internet. Attempted internet purchases were more likely among younger respondents, males, frequent smokers, and respondents reporting lower perceived availability of tobacco products from retail and social sources.CONCLUSIONS Few adolescent smokers in California surveyed during the 1999-2000 school year had attempted to obtain cigarettes from the internet. As internet access increases, future studies should examine whether internet cigarette vendors sell to minors and whether adolescents are purchasing cigarettes on the internet.

Azagba S., Ebling T., Korkmaz A.

Dragone D., Vanin P.

Abstract We study income and price effects for intertemporal consumer problems with monetary and non-monetary dynamic constraints. We focus on short and long-run responses to a permanent change in income or price, and we characterize how such responses depend on the law of motion of non-monetary dynamic constraints and on time discounting. We provide a dynamic analog to the Slutsky equation, and we show the conditions under which the elasticity of demand to income or price is smaller in the long than in the short run, or even has opposite sign.

Chuo A., Cotti C., Courtemanche C., Maclean J.C., Nesson E., Sabia J.

Shrestha V.

Abstract This study reassesses the efficacy of cigarette taxation in curtailing smoking by leveraging recent advancements in the difference-in-differences (DiD) literature to account for heterogeneous treatment effects. Using data from the Behavioral Risk Factor Surveillance System Selected Metropolitan/Micropolitan Area Risk Trend (BRFSS SMART) for the sample periods 2004-2010 and 2015-2020, the study reveals three key findings. Firstly, the TWFE estimate for the 2004-2010 sample is only 48% of the average treatment effect on the treated (ATT) estimate obtained through the DiD framework. Secondly, event-study-type estimates demonstrate a gradual increase in magnitude following the treatment year, highlighting dynamic treatment effects overlooked by the TWFE estimate. Third, the ATT estimate for the 2015-2020 sample is approximately 66% of the ATT estimate for the 2004-2010 sample. Overall, the study underscores the potential bias toward zero in elasticity estimates when relying solely on TWFE models.

Barbaro S., Neu-Yanders N., König N.

Abstract Despite the implementation of significant measures by European countries in recent years, smoking rates in Europe remain persistently high. The European Commission is currently undertaking a comprehensive review of its tobacco regulations. This article aims to address critical inquiries that arise during the amendment of the regulatory framework. We evaluate the effectiveness of existing tobacco control methods and observe a diminishing impact on promoting smoking cessation. Additionally, we explore how individuals of varying genders respond to the regulatory environment. We propose a comprehensive and evidence-based framework for implementing a taxation system in response to the proliferation of emerging products, including e-cigarettes and heated tobacco. This system is designed to align effectively with health policy objectives, providing a strategic approach to curbing tobacco use and promoting public health.

Conlon C., Rao N., Wang Y.

Abstract We find that sin-good purchases are highly concentrated, with 10% of households paying more than 80% of taxes on alcohol and cigarettes. Total sin-tax burdens are poorly explained by demographics (including income) but are well explained by eight household clusters defined by purchasing patterns. The two most taxed clusters comprise 8% of households, pay 63% of sin taxes, and are older, less educated, and lower income. Taxes on sugary beverages broaden the tax base but add to the burdens of heavily taxed households. Efforts to increase sin taxes should consider the heavy burdens borne by few households.

Akter S., Rahman M.M., Rouyard T., Aktar S., Nsashiyi R.S., Nakamura R.

This preregistered systematic review and meta-analysis (PROSPERO: CRD 42022311392) aimed to synthesize the effectiveness of all available population-level tobacco policies on smoking behaviour. Our search across 5 databases and leading organizational websites resulted in 9,925 records, with 476 studies meeting our inclusion criteria. In our narrative summary and both pairwise and network meta-analyses, we identified anti-smoking campaigns, health warnings and tax increases as the most effective tobacco policies for promoting smoking cessation. Flavour bans and free/discounted nicotine replacement therapy also showed statistically significant positive effects on quit rates. The network meta-analysis results further indicated that smoking bans, anti-tobacco campaigns and tax increases effectively reduced smoking prevalence. In addition, flavour bans significantly reduced e-cigarette consumption. Both the narrative summary and the meta-analyses revealed that smoking bans, tax increases and anti-tobacco campaigns were associated with reductions in tobacco consumption and sales. On the basis of the available evidence, anti-tobacco campaigns, smoking bans, health warnings and tax increases are probably the most effective policies for curbing smoking behaviour. In this systematic review and meta-analysis of population-level tobacco control policies, Akter et al. find that anti-tobacco campaigns, smoking bans, health warnings and tax increases are effective measures for curbing smoking behaviour.

Buszkiewicz J.H., Xie Y., Cohen A., Vander Woude C., Colston D.C., Patrick M.E., Elliott M.R., Levy D.T., Thrasher J.F., Fleischer N.L.

To examine whether Tobacco 21 (T21) law coverage moderated associations between cigarette prices and adolescent smoking and associated disparities.

Dennett J.

von Hinke S., James J., Sorensen E., Sievertsen H.H., Vitt N.

Mtenga E.L., Pesko M.F.

AbstractWe study the impact of vertical identification card laws, which changed the orientation of driver's licenses and state identification cards from horizontal to vertical for those under 21 years, on teenage tobacco and alcohol use. We study this question using four national datasets (pooled national and state Youth Risk Behavior Surveillance System, National Youth Tobacco Survey, Current Population Survey to Tobacco Use Supplements, and Behavioral Risk Factor Surveillance System). We improve previous databases of vertical ID law implementation by using original archival research to identify the exact date of the law change. We estimate models using standard two‐way fixed effects and stacked difference‐in‐differences that avoid bias from dynamic and heterogeneous treatment effects. Using data through 2021, we do not find evidence of reductions in teenage tobacco and alcohol use. While these laws reduce retail‐based purchasing, they also increase social sourcing, thus leading to no net impact on use.

Messer K., Pierce J.P., Chen J., Luo M., Stone M.D., Leas E.C., Shi Y., Strong D.R., Trinidad D.R., McMenamin S.B.

ObjectiveTo investigate the association of state-level cigarette price and tobacco control expenditure with the large 2000–2019 decline in cigarette smoking among US 18–24 year-olds.MethodsSmoking behaviour was assessed in the 24 most populous US states using the 1992–2019 Tobacco Use Supplements to the Current Population Survey; association with price and expenditure was tested using adjusted logistic regression. States were ranked by inflation-adjusted average price and tobacco control expenditure and grouped into tertiles. State-specific time trends were estimated, with slope changes in 2001/2002 and 2010/2011.ResultsBetween 2000 and 2010, the odds of smoking among US young adults decreased by a third (adjusted OR, AOR 0.68, 95% CI 0.56 to 0.84). By 2019, these odds were one-quarter of their 2000 level (AOR 0.24, 95% CI 0.19 to 0.31). Among states in the lowest tertile of price/expenditure tobacco control activity, initially higher young adult smoking decreased by 13 percentage points from 2010 to 2018–2019, to a prevalence of 5.6% (95% CI 4.5% to 6.8%), equal to that in the highest tobacco-control tertile of states (6.5%, 95% CI 5.2% to 7.8%). Neither state tobacco control spending (AOR 1.0, 95% CI 0.999 to 1.002) nor cigarette price (AOR 0.96, 95% CI: 0.92 to 1.01) were associated with young adult smoking in statistical models. In 2019, seven states had prevalence over 3 SDs higher than the 24-state mean.ConclusionNational programmes may have filled a gap in state-level interventions, helping drive down the social acceptability of cigarette smoking among young adults across all states. Additional interventions are needed to assist high-prevalence states to further reduce smoking.

Friedson A., Li M., Meckel K., Rees D.I., Sacks D.W.

AbstractAre teenage and adult smoking causally related? Recent anti‐tobacco policy is predicated on the assumption that preventing teenagers from smoking will ensure that fewer adults smoke, but direct evidence in support of this assumption is scant. Using data from three nationally representative sources and instrumenting for teenage smoking with cigarette taxes experienced at ages 14–17, we document a strong positive relationship between teenage and adult smoking: deterring 10 teenagers from smoking through raising cigarette taxes roughly translates into 5 fewer adult smokers. We conclude that efforts to reduce teenage smoking can have long‐lasting consequences on smoking participation and, presumably, health.

Courtemanche C., Liang Y., Maclean J.C., Muratori C., Sabia J.

Merkaj E., Zhllima E., Imami D., Gjika I., Guerrero-López C.M., Drope J.

BackgroundAlbania has one of the highest smoking prevalences in Europe and it is particularly high among the youth population. There is a dearth of evidence in Albania, most of Eastern Europe and most middle-income countries on the effect of price on smoking experimentation.ObjectiveThe study aimed to assess the effect of price and tobacco control policies on youth smoking experimentation in Albania.MethodsWe used microdata from the Global Youth Tobacco Survey in Albania for 2004, 2009, 2015 and 2020. We constructed a pseudo-longitudinal dataset and estimated a split-population model to assess the hazard of smoking initiation.ResultsPrice is a significant predictor of smoking experimentation among teenagers in Albania for both males and females (p<0.001). Being male increases the odds for smoking experimentation by more than 50% as compared with females (p<0.001), whereas females appear to be more price sensitive. Peer and parent smoking are also important determinants for smoking experimentation. Introducing penalties for smokers and legal entities violating smoke-free policies implemented in 2014 is also associated with a lower hazard of smoking experimentation.ConclusionPrice is a significant predictor of smoking experimentation among teenagers in Albania for both males and females. A combination of increasing taxes and strengthening the rule of law to control tobacco use in public spaces, in addition to public awareness campaigns targeting both youth and smoking parents, could help to significantly reduce the probability of smoking experimentation.