The Demand for Cigarette Smuggling

Richard R. Saba, T. Randolph Beard, Robert B. Ekelund, Rand W. Ressler

Research output: Contribution to journalArticlepeer-review

69 Scopus citations

Abstract

<div class="line" id="line-22"> When taxes raise the full price of a good above that in nearby jurisdictions consumers have an incentive to cross into the lower&hyphen;price jurisdiction to make purchases. Using a simple microeconomic model of the consumer's border&hyphen;crossing decision, we derive an econometric model to test the significance of border crossing and estimate the magnitude of the resulting sales. Examining cigarette sales in the continental U.S. over the period 1960 to 1986, we find strong evidence that border crossing is a significant factor in explaining sales differentials between states. Implications for demand estimation and excise tax policy are discussed.</div><div class="line" id="line-34"> <br/></div><div class="line" id="line-37"> <br/></div><div class="line" id="line-40"> <br/></div>
Original languageAmerican English
JournalEconomic Inquiry
Volume33
DOIs
StatePublished - Apr 1995

Disciplines

  • Finance and Financial Management
  • Business

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