NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Relative Tax Rates, Proximity and Cigarette Tax Noncompliance: Evidence from a National Sample of Littered Cigarette Packs

Shu Wang, David Merriman, Frank J. Chaloupka

NBER Working Paper No. 22577
Issued in August 2016
NBER Program(s):HE, PE

We analyze data about cigarette tax compliance from the first national scale littered cigarette packs collection. We code each pack based on whether an appropriate tax had been paid at the location where it was found. Noncompliance across our 132 sample communities ranges from zero to one hundred percent with an appropriately weighted mean of 21 percent. We provide evidence that noncompliance is due to both cross-border shopping and cigarette trafficking. OLS and binomial logit regressions demonstrate that the financial incentive for non-compliance is the most important explanatory variable and has a statistically and quantitatively significant impact on noncompliance.

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Document Object Identifier (DOI): 10.3386/w22577

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