The Heterogeneous Geographic and Socioeconomic Incidence of Cigarette Taxes: Evidence from Nielsen Homescan Data

Abstract

We use Nielsen Homescan data to examine who bears the economic burden of cigarette taxes. We find cigarette taxes are less than fully passed through to consumer prices, suggesting consumers and producers split the excess burden of these taxes. Using information on consumer location, we show the availability of lower-tax goods across state borders creates significant differences in the pass-through rate. Tax avoidance opportunities also have a sizable effect on purchasing behavior by altering consumer search, prices paid and quantities purchased. Finally, we demonstrate that the incidence of cigarette taxes and the border effect varies by household income and education. (JEL D12, H22, H25, H26, H71, L66)

Cigarette Price-Minimization Strategies by U.S. Smokers

“…Consistent with evidence on the impacts of price-minimization strategies on the pass-through rates of cigarette excise taxes, [17][18][19] these results suggest that rather than quitting in reaction to a cigarette excise tax increase, price-sensitive smokers may have low-priced alternatives that allow them to continue to purchase cigarettes within their budget. These behaviors may decrease the health benefit of cigarette excise tax increases.…”

Cigarette Price Minimization Strategies in the United States: Price Reductions and Responsiveness to Excise Taxes

“…Table 3 provides evidence that the eight cigarette excise tax increases occurring during the survey period increased price reduction savings. The results suggest that the increases in cigarette excise taxes had a 97% (p < .001) pass-through rate to cigarette prices in these states, which is slightly higher than a 90% pass-through rate found in a recent study using similar controls (Harding, Leibtag, & Lovenheim, 2012; Table 2, column 4). The independent price reduction estimates for the three strategies are not statistically different from those presented in Table 1.…”

Who likes it “sparkling”? An empirical analysis of Prosecco consumers’ profile

“…This information, along with the date of purchase, is linked with demographic details of the household and the household purchasing history. j Outside the wine sector, Homescan data have also been used to estimate brand level price elasticities and price response elasticities (Cotterill, 1994), change in household purchasing habits due to business cycle fluctuation (Cotti et al, 2014), the influence of selected demographic variables associated with purchase of organic milk (Alviola and Capps, 2010), the effect of taxes on sales (Harding et al, 2012) and the causes of price difference across households (Abe and Shiotani, 2014).…”