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 hypothetical tax increases by adjusting cigarette shopping behaviors, substituting toward 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. A $1 increase in cigarette taxes causes a modest reduction in human capital-related expenditures among below-median-income smokers ($48 less per quarter). Our work uncovers important unintended consequences of cigarette taxes, particularly for low-income individuals.
-
-
Copy CitationMichael E. Darden, Reginald B. Hebert, Michael F. Pesko, and Samuel Sturm, "Cigarette Taxes and the Household Budget," NBER Working Paper 33746 (2025), https://doi.org/10.3386/w33746.Download Citation
-
-
Related
Programs
Mentioned in the News
More from the 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 Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
