The Impact of Clean Indoor-Air Laws and Cigarette Smuggling on Demand for Cigarettes: An Empirical Model

Health Econ. 2000 Mar;9(2):159-70. doi: 10.1002/(sici)1099-1050(200003)9:2<159::aid-hec499>3.0.co;2-t.

Abstract

This study examines the impact of clean indoor-air laws and smuggling activities on states' per capita cigarette consumption and revenues by using a static demand model. The analysis was based on data for 50 states and the District of Columbia (DC) of the United Sates over the period 1970-1995. The estimated price elasticities of demand for cigarettes ranged from -0.48 to -0.62, indicating that a 10% increase in price would reduce consumption per capita by 4.8% to 6.2%. Anti-smoking laws had a significant negative impact on per capita consumption. In 1995, consumption was reduced by 4.7 packs per capita among states with anti-smoking laws, or 1.1 billion fewer packs of cigarettes consumed. Both short-distance smuggling between neighbouring states and long-distance smuggling from Kentucky, North Carolina and Virginia existed and were significant. Smuggling activities from military bases and Indian reservations, however, were not significant. On average, 6% of states' tax revenues were lost due to smuggling activities in 1995. Results also showed that short-distance smuggling was less important than long-distance smuggling as a source of the revenue loss.

Publication types

  • Comparative Study

MeSH terms

  • Air Pollution, Indoor / economics
  • Air Pollution, Indoor / legislation & jurisprudence*
  • Commerce / economics
  • Commerce / legislation & jurisprudence*
  • Crime / economics
  • Data Collection
  • Models, Econometric*
  • Plants, Toxic*
  • Regression Analysis
  • Taxes / economics
  • Tobacco*
  • United States