Cigarette Taxes and the Household Budget
We study the effects of cigarette excise taxes on smokers’ household budgets. In a randomized survey experiment, smokers respond to tax increases by adjusting cigarette shopping behaviors, substituting towards other tobacco products, and reducing both discretionary and human capital-related expenditures. Using Consumer Expenditure Survey data and a quasi-experimental design, we find cigarette taxes reduce smoking prevalence but increase cigarette expenditures among continuing smokers. Additionally, a $1 increase in cigarette taxes causes a 2.12% decline in human capital-related expenditures among below median income smokers. Our work uncovers important unintended consequences of cigarette taxes, particularly for low-income individuals.
Related
Programs
More from NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
