NBER WORKING PAPER SERIES THE EFFECTS OF E-CIGARETTE TAXES ON E-CIGARETTE PRICES AND TOBACCO PRODUCT SALES: EVIDENCE FROM RETAIL PANEL DATA

This paper estimates effects of e-cigarette taxes enacted in eight states and two large counties on e-cigarette prices, e-cigarette sales, and sales of other tobacco products. We use NielsenIQ Retail Scanner data from 2011 to 2017, comprising approximately 35,000 retailers nationally, and develop a method to standardize e-cigarette taxes since adopting localities have taxed these products in heterogeneous ways. We estimate a tax-to-price pass-through rate of 1.44 and a Herfindahl–Hirschman Index of 0.246 for e-cigarette retail purchases, indicating a moderately to highly concentrated market structure theoretically linked to tax over-shifting. We then calculate an e-cigarette own-price elasticity of -1.30 and positive cross-price elasticities of demand between e-cigarettes and cigarettes, suggesting they are economic substitutes. Other analyses explore heterogeneity in tax and price responses across flavored and non-flavored e-cigarettes and cigarettes. Chad D. Cotti Department of Economics University of Wisconsin-Oshkosh and Center for Demography of Health and Aging University of Wisconsin-Madison cottic@uwosh.edu Charles J. Courtemanche Department of Economics Gatton College of Business and Economics University of Kentucky Lexington, KY 40506-0034 and NBER courtemanche@uky.edu Johanna Catherine Maclean Department of Economics Temple University Ritter Annex 869 Philadelphia, PA 19122 and NBER catherine.maclean@temple.edu Erik T. Nesson Department of Economics Ball State University Muncie, IN 47306 and NBER etnesson@bsu.edu Michael F. Pesko Department of Economics Andrew Young School of Policy Studies Georgia State University PO Box 3992 Atlanta, GA 30302-3992 mpesko@gsu.edu Nathan Tefft Department of Economics Bates College Lewiston, ME 04240 ntefft@bates.edu