Are there interregional differences in the response of cigarette smoking to state cigarette excise taxes in the USA? Exploratory analysis

Abstract

Within the context of the period fixed-effects model, this study uses a 2002–2009 state-level panel data set of the USA to investigate the relative impact of state cigarette excise taxation across the nation in reducing cigarette smoking. In particular, by focusing upon the state cigarette excise taxation levels within each of the nine US Census Divisions, this study investigates whether there are inter-regional differences in the rate of responsiveness of cigarette consumption to increased state cigarette taxes. The initial empirical estimates reveal that although the per capita number of packs of cigarettes smoked annually is a decreasing function of the state cigarette excise tax in all nine Census Regions, the relative response of cigarette smoking to state cigarette tax increases varies considerably from one region to the next. Reinforcing this conclusion, in one specification of the model, the number of packs of cigarettes smoked in response to a higher state cigarette tax is statistically significant and negative in only eight of the nine Census Divisions. Furthermore, when cigarette smoking is measured in terms of the percentage of the population classified as smokers, interregional differentials in the response of smokers to higher state cigarette taxes are much greater. Thus, there is evidence that cigarette excise taxation exercises rather different impacts on the propensity to smoke across Census Regions.