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Who Pays Cigarette Taxes? The Impact of Consumer Price Search

Philip DeCicca1; Donald Kenkel2; Feng Liu3

1 McMaster University · 2 Cornell University · 3 Shanghai University of Finance and Economics

The Review of Economics and Statistics 2013

We conduct an empirical study of the impact of consumer price search on the shifting of cigarette excise taxes to consumer prices. We use novel data on the prices that smokers report paying and document substantial price dispersion. We find that cigarette taxes are shifted at lower rates to carton buyers and, especially, smokers who buy cartons of cigarettes in a state other than their state of residence. We also find evidence that taxes are shifted at somewhat lower rates to the prices paid by heavier smokers and at somewhat higher rates to the prices paid by smokers of light cigarettes.

DOI
10.1162/rest_a_00303
Volume
95 (2)
Pages
516-529
Language
en
Export
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