Who Pays Cigarette Taxes? The Impact of Consumer Price Search

03 medical and health sciences jel:I1 0302 clinical medicine cigarette taxes, consumers, smokers jel:I18 jel:H2 0502 economics and business 05 social sciences jel:H22
DOI: 10.1162/rest_a_00303 Publication Date: 2012-07-18T22:12:40Z
ABSTRACT
Abstract 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.
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