NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Interstate Cigarette Bootlegging: Extent, Revenue Losses, and Effects of Government Intervention

Marie C. Thursby, Jerry G. Thursby

NBER Working Paper No. 4763
Issued in June 1994
NBER Program(s):   ITI

In this paper, we develop and estimate a model of commercial smuggling in which some, but not all, firms smuggle a portion of the cigarettes they sell. The model is used to examine the effects on interstate cigarette smuggling of the Contraband Cigarette Act and a change in the federal excise tax. We find that both policies have unintentional effects. While the Contraband Cigarette Act was imposed to reduce interstate smuggling, we find it had the opposite effect. In contrast, an increase in the federal tax is not intended to affect smuggling, but we find it increases the portion of cigarette sales that is commercially smuggled.

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Published: National Tax Journal (November 1999).

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