The Economics of Electronic Nicotine Delivery Systems: Advertising and Outcomes

Project Outcomes Statement

This research project assesses the impact of advertising, cost, and policies restricting access related to electronic cigarettes (ecigarettes) on tobacco use behaviors for adults and youth.
In one study from this project, we provide the first causal evidence on whether e-cigarette advertising on television and in magazines encourages adult smokers to quit. We find the answer to be yes for TV advertising but no for magazine advertising. Our results indicate that a policy banning TV advertising of e-cigs would have reduced the number of smokers who quit in the recent past by approximately 3 percent. If the FDA were not considering regulations and mandates, e-cig ads might have reached the number of nicotine replacement therapy TV ads during that period. That would have increased the number of smokers who quit by around 10 percent.
E-cigarettes provide nicotine in a vapor form, which is considered less harmful than the smoke from combustible cigarettes because it does not contain the toxins that are found in tobacco smoke. E-cigarettes may be effective in helping smokers to quit or they might simply provide smokers a method of bypassing smoking restrictions. There is very little causal evidence to date on how e-cigarette use impacts smoking cessation among adults. Minnesota was the first to impose a tax on e-cigarettes. This tax provides a plausibly exogenous deterrent to e-cigarette use. In another study from this project, we utilize data from the Current Population Survey Tobacco Use Supplements from 1992 to 2015 to assess how the Minnesota tax increase impacted smoking cessation among adult smokers. Estimates suggest that the e-cigarette tax increased adult smoking and reduced smoking cessation in Minnesota, relative to the control group, and imply a cross elasticity of current smoking participation with respect to e-cigarette prices of 0.13. Our results suggest that in the sample period about 32,400 additional adult smokers would have quit smoking in Minnesota in the absence of the tax. If this tax were imposed on a national level
about 1.8 million smokers would be deterred from quitting in a ten-year period. The taxation of e-cigarettes at the same rate as cigarettes could deter more than 2.75 million smokers nationally from quitting in the same period. The public health benefits of not taxing e-cigarettes, however, must be weighed against effects of this decision on efforts to reduce vaping by youth.
Shifting the focus to youth, we also examine the effects of e-cigarette Minimum Legal Sale Age (MLSA) laws on youth cigarette smoking, alcohol consumption, and marijuana use. Our results suggest that these laws increased youth smoking participation by about one percentage point, approximately half of which could be attributed to smoking initiation. We find little evidence of higher cigarette smoking persisting beyond the point at which youth age out of the law. Our results also show little effect of the law on youth drinking, binge drinking, and marijuana use. Taken together, our findings suggest a possible unintended effect of e-cigarette MLSA laws—rising cigarette use in the short term while youth are restricted from purchasing e-cigarettes.
Over the past decade, rising youth use of e-cigarettes and other electronic nicotine delivery systems (ENDS) has prompted aggressive regulation by state and local governments. Between 2010 and 2019, ten states and two large counties adopted
ENDS taxes. Applying a continuous treatment difference-in-differences approach to data from two large national datasets (Monitoring the Future and the Youth Risk Behavior Surveillance System), in another study focused on youth and adolescents, we explore the impact of ENDS taxes on their tobacco use. We find that ENDS taxes reduce youth e-cigarette consumption, with estimated e-cigarette tax elasticities of -0.06 to -0.21. However, we estimate sizable positive cigarette cross-tax elasticities, suggesting economic substitution between cigarettes and e-cigarettes for youth. These substitution effects are
particularly large for frequent cigarette smoking. We conclude that the unintended effects of ENDS taxation may considerably undercut or even outweigh any public health.