further evidence on the variability of inflation and relative price variability abstract using a sample of monthly observations of both a 12 category group and a 203 category group of personal consumption expenditures we furnish evidence that relative price variability is positively related to both the inflation rate and inflation variability the relation is robust to oil price shocks

cross border mergers and upstreaming global forces of fragmentation continue to distance upstream a product s conception from its end use a concurrent flow of cross border mergers and upstreaming by multinational corporations dominates the fashion of doing international business we investigate if there is any link between cross country variations in upstreaming within firms apparent in international data and mergers between firms across borders our empirical analysis reveals a significantly positive association between country upstreamness and cross border mergers we build on neary as well as beladi et al to provide a theoretical explanation of our findings in terms of the incentives in business strategic decision making to realise the gains from cross border mergers and upstreaming through the pricing mechanism of intermediate inputs in a vertically related oligopolistic industry

estimating dynamic demand for cigarettes using panel data the effects of bootlegging taxation and advertising reconsidered abstracct a dynamic demand for cigarette consumption is estimated using pooled data of 46 states over the period 1963 to 1980 a price elasticity of 0 2 and an insignificant income elasticity is found using pooled estimation techniques the bootlegging effect is modeled explicitly using neighboring price the effect is found to be significant two major policy issues are analyzed in light of these new estimates 1 cigarette taxation is found to be an effective tool for generating revenues even though there may be spillover effects to neighboring states where bootlegging is significant 2 the effects of the fairness doctrine act and the advertising ban on cigarette consumption are re examined we find mild support for the effectiveness of subsidized anti smoking messages in reducing cigarette consumption and no support for the thesis that the ban on advertising helps to increase per capita consumption

the effects of price and smoking risk information on the demand for tobacco in taiwan an empirical study this study evaluates the effects of a cigarette price increase and smoking risk information on tobacco consumption in taiwan tobacco price expenditure and an index of smoking risk information for taiwan were introduced into a central bureau of statistics cbs demand model to estimate several cigarette demand elasticity coefficients according to this model increasing the cigarette price is a more effective means of reducing cigarette consumption than disseminating more risk information in addition we found that a price rise of nt 5 per cigarette pack would cause a reduction in the consumption of domestic and imported cigarettes of 3 23 and 4 86 packs per capita respectively total per capita consumption of cigarettes would be reduced annually by 8 09 packs 7 56 despite this reduction in cigarette consumption the increase in cigarette price would at the same time lead to a significant net increase in tax revenue to the taiwan government

advertising and the us market demand for beer the us per capita market demand for beer is empirically estimated to determine the effect of advertising on the demand for beer the empirical results indicate that the most important determinants of demand are the price of beer the price of substitutes demographic factors and a light beer dummy variable the positive effects of income and lagged consumption appear to be small although many have argued that advertising promotes beer consumption the empirical results of this study do not support this hypothesis

the demand for cigarette smuggling introduction an enduring issue in economic analysis involves accounting for the behavior of agents when illegal or quasi legal activity is rewarded smuggling retrading under regulations or restrictions bribery and bootlegging are all aspects of the general phenomenon common contemporary forms of such activity are the smuggling of prohibited substances such as drugs or medicines prohibited arms or weapons or highly taxed commodities between countries 1 but smuggling or bootlegging of highly taxed or otherwise regulated legal commodities such as alcohol cigarettes or gasoline also takes place within countries in the united states such illegal activity both casual and organized may have significant effects on state tax revenues it may also alter the expected consumption effects of specific tax changes in a competitive environment the existence of different tax structures between states may mean that a given state s tax enactments will not have their desired revenue or consumption effects this paper offers a new econometric methodology for estimating the economic effect of border crossing between u s states our technique in contrast to previous models of cross border effects allows accommodation of the dichotomy between variations in state level sales due to state specific characteristics such as prices tastes incomes and other demographic factors the presence of organized smuggling tourism and so on and demand variations due to casual border crossing beginning with a simple theoretical model of a representative consumer s border crossing decision we develop a nonlinear econometric model which produces estimates of the representative consumer s demand in each state it allows estimation of the degree and direction of sales to border crossing consumers for each state and facilitates explicit testing of the statistical significance of border crossing in explaining variations in cigarette sales between jurisdictions the data set is comprised of state level cigarette sales for the forty eight contiguous states and the district of columbia over the period 1960 to 1986 we obtain strong evidence that border crossing is a significant factor in explaining cigarette sales differentials and we identify states which have important border crossing sales further we note the consequences of border crossing for demand elasticity estimation and tax policy in general the evidence indicates that the ability of states to raise revenue via cigarette taxation is more constrained than conventional analysis suggests the paper is divided into five sections section ii discusses bootlegging and previous literature on cigarette demands and smuggling section iii presents our theoretical and empirical models while section iv discusses the data and our statistical results section v concludes the paper and examines some of the policy implications of our findings ii the economic literature on smuggling smuggling bootlegging or arbitrage takes place when full prices net of all costs differ for legal or illegal goods between specific economic units when net returns to smuggling or bootlegging all production and consumption opportunity costs being considered are positive arbitrage will occur in an organized and or casual fashion a primary though not an exclusive reason for smuggling has been the often significant divergence between full prices in different locales caused by differences in tax treatment a variety of models starting with wales 1968 have been employed to analyze problems related to smuggling and bootlegging jensen thursby and thursby 1988 and bhagwati and hansen 1973 study camouflaging systems the mixture of legal and illegal sales from the firm s perspective with contrasting welfare results smith 1976 integrates illegal markets into the traditional theory of taxation but explicitly ignores casual smuggling earlier studies considering cross border effects have not specified a theoretical foundation and in this respect our approach is fundamentally different

the effectiveness of anti smoking legislation a review abstract this survey focuses on government efforts to curb the use of undesirable goods notably tobacco products we synthesize the economics literature and examine the effectiveness of government curbs on tobacco consumption through non price controls such as bans on cigarette advertising health warnings and workplace smoking bans and price measures or higher prices through higher taxes this literature review is unique in that we do not merely aim to provide a summary of the literature rather our main focus is to draw conclusions from the literature regarding the effectiveness of alternate policy measures across countries in checking smoking and to provide directions suggestions for extending the scope of government intervention to other tobacco products

information shocks and cigarette addiction views from dynamic panels with common structural changes in this article we attempt to evaluate the impact of various information shocks on cigarette consumption in contrast to the existing studies we do not impose any break points a priori we use recently developed techniques for sample splitting in the data on us cigarette demand and find that using a time index as a transition variable can cluster cigarette demand into four distinct regimes in the past four decades a myopic to rational switch in cigarette consumption behaviour was observed in response to various anti smoking information events in particular we find strong evidence in support of the rational addiction model in the 1980s and 1990s moreover in line with the theoretical prediction our estimate of the long run elasticity is twice as large as the short run elasticity our empirical framework should improve policy makers understanding of the dynamics of cigarette consumption in response to various anti smoking campaigns and stress the role of sound policy making in improving smoking con

is there the threshold effect of cigarette price on smoking prevalence a cross country panel data analysis this article shows new cross country evidences by empirically investigating the joint effects of cigarette price levels and joining the world health organization framework convention on tobacco control who fctc on smoking prevalence in 74 countries over the period of 2000 2003 2005 and 2006 we assessed cigarette price elasticity for three national income levels using different databases on cigarette price from the economist intelligence unit eiu demographic and socioeconomic country characteristics from the world bank and adjusted smoking prevalence rates published by various yearly who reports on the global tobacco epidemic from 2000 to 2010 a panel threshold regression was used to capture the nonlinear effects that cigarette prices on smoking prevalence at the three national income levels endogenously determined by estimation our findings supported the evidence that joining the who fctc would have a positive effect on reducing cross country smoking prevalence especially among countries with l

taxation or regulation looking for a good anti smoking policy abstract this paper investigates the relative ability of two anti smoking policies taxes and regulation in inducing reductions in cigarette consumption and in providing incentives to stop smoking or not to start to our results based on canadian data show that cigarette demand responds to taxes elasticity of 0 28 but not to regulation while the converse is true for the proportion of smokers in the population

the fleeting effect of advertising abstract this paper adds to the evidence that advertising effects depreciate rapidly inclusion of lagged advertising in empirical models may be unnecessary in addition the notion that accumulated advertising effects may be a barrier to entry is called into question

a further interpretation of friedman s hypothesis the cointegration of component cpi indexes abstract this study extends the friedman 1977 friedman m 1977 nobel lecture inflation and unemployment journal of economic dynamics and control 12 231 254 hypothesis regarding inflation means and variances to show that high inflation is also associated with greater divergence of component inflation indexes over time this finding follows friedman s reasoning involving inflation uncertainty and time lagged adjustments

worldwide organized cigarette smuggling an empirical analysis this article estimates the economic size and the impact on government revenues of cigarette smuggling worldwide and formulates economic policies that can be used to effectively address the problem first information from various sources are combined and a global map of smuggling routes for cigarettes is described by examining the international cigarette trade records the hub transit countries in six regions of the world are identified second a variable that measures smuggling incentives for cigarettes is defined and computed for 110 countries third a static global demand model for cigarettes that includes the smuggling incentives variable is specified and robustly estimated using the estimation results global price and income elasticities of cigarette demand are obtained as 0 41 and 0 37 respectively it is estimated that in 1999 3 4 of global cigarette consumption was smuggled and 7 4 of tax revenue was lost to smuggling fourth the best policy options are identified to achieve the objec

cigarette smoking and self control this paper empirically studies time inconsistent preferences in the context of cigarette smoking behavior with hyperbolic discounting an individual has time inconsistent preferences which give rise to a lack of self control i e she may perpetually postpone the execution of a plan this implies that a smoker who wants to quit has a demand for control devices e g a smoking ban in public areas or a hike in cigarette excise taxes this paper empirically tests this implication using a sample that is based on survey data from taiwan the estimation results indicate that a smoker s intention to quit has a positive effect on the smoker s support for smoking bans and a cigarette excise tax increase these results lend support to the validity of the time inconsistent preferences in the context of cigarette smoking behavior this casts doubt on the validity of the assumption that individuals have time consistent preferences in becker and murphy s becker g s murphy k m 1988 a theory of rational addiction journal of political economy 96 4 675 700 rational addiction model

cigarette tax avoidance and evasion variation in state cigarette taxes provides incentives for tax avoidance through smuggling legal border crossing to low tax jurisdictions or internet purchasing when taxes rise tax paid sales of cigarettes will decline both because consumption will decrease and because tax avoidance will increase the key innovation of this paper is to compare cigarette sales data to cigarette consumption data from the behavioral risk factor surveillance system brfss i show that after subtracting percent changes in consumption residual percent changes in sales are associated with state cigarette tax changes implying the existence of tax avoidance i estimate that the tax avoidance response to tax changes is at least twice the consumption response and that tax avoidance accounted for up to 9 6 of sales between 1985 and 2001 because of the increase in tax avoidance tax paid sales data understate the level of smoking and overstate the drop in smoking i also find that the level of legal border crossing was very low relative to other forms of tax avoidance if states have strong preferences for smoking control they must pair high cigarette taxes with effective policies to curb smuggling and other forms of tax avoidance or employ alternative policies such as counter advertising and smoking restrictions

estimating tax incidence market power and market conduct the european cigarette industry abstract recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under shifted onto consumers in the presence of imperfect competition these results are used to derive a method of estimating market power and conduct an application is made to the european cigarette industry previous empirical comparison of the incidence of ad valorem and specific taxes is limited for a group of countries with broadly similar cigarette industries there is evidence of undershifting of both taxes with the specific tax having a significantly greater impact on price the extremes of both perfect competition and monopoly can be rejected behaviour is no less competitive than the equivalent of cournot

can higher cigarette taxes improve birth outcomes abstract this study examines whether higher state cigarette taxes can be used to improve birth outcomes data on the outcomes of interest are taken from the 1989 1992 natality detail files generating a sample of roughly 10 5 million births the results suggest that smoking participation among pregnant women declines and average birth weights rise when excise taxes are increased these results can be used to form an instrumental variables estimate of the impact of smoking on birth weight this estimate is remarkably close to numbers from a random assignment clinical trial the smoking participation price elasticity is estimated to be 0 5

wage subsidies and distortionary taxes in a mobile capital harris todaro model in prescribing policy to eliminate or mitigate the effects of labour market distortions some form of wage subsidy is usually among the highest ranking options rarely is the source of revenues for these subsidies treated as an explicit issue this omission has special significance for the harris todaro h t model of the labour market since the policy most frequently recommended whether capital is sector specific or intersectorally mobile is an across the board wage subsidy 2 this effectively eliminates the possibility of taxing one subset of sectors rather than subsidizing its complement an option often favoured by those theorists who concern themselves with revenue considerations the next section of this paper sets forth the model of a small open h t economy with mobile capital that is the basis for this analysis section ii re examines three wage subsidies on manufacturing wages on agricultural wages or on both sectors assuming that resources for the subsidies are raised by an across the board tax on profits this is in the tradition of cordenfindlay and we replicate their results though stating them in more precise form so that we might have a standard for later comparison the subsequent sections examine the effects of these subsidies on unemployment and resource allocation if they are financed by a tax on profits in the manufacturing sector section iii or by import tariffs section iv owing to the second best nature of the h t model it will be demonstrated that taxes normally considered distortionary in their own right can be superior to an across the board tax if revenues are constrained and can be very useful instruments if it is the variety of policy tools that is limited section v concludes with a ranking of the various subsidy tax packages

horizontal and vertical indirect tax competition theory and some evidence from the usa this paper provides a simple theoretical framework for analysing simultaneous vertical and horizontal competition in excise taxes and estimates equations informed by the theory on a panel of us state and federal excise taxes on cigarettes and gasoline we also examine the role played by smuggling the results are generally consistent with the theory when the characteristics of the markets for the goods are taken into account for neither good do federal excise taxes affect state taxes taxes in neighbouring states have a significant and large effect in the case of cigarettes and a much weaker effect in the case of gasoline we also find that in the setting of cigarette taxes concerns about cross border shopping play a more important role than concerns about smuggling

cigarettes and addiction information simulating the demand effects of the tobacco industry s conspiracy of silence although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962 the information did not become available to the us public until 1979 when the surgeon general disclosed it us department of health education and welfare 1979 this study simulates the impact this information would have had on the demand for cigarettes had it been released in 1962 the simulations build on past work by fenn et al 2001 who found evidence that the release of addiction information resulted in a structural shift in demand in 1979 in the present study the econometric results from fenn et al 2001 are used to compute simulated time paths for state level per capita consumption under the hypothetical scenario involving the earlier release of the addiction information using these simulated consumption paths the projected reductions in cigarette sales revenue are calculated these dollar figures provide a benchmark against which to judge the compensation amounts that the industry must

relationship between inflation rate and inflation uncertainty abstract to shed further light on the possible link between inflation rate and inflation uncertainty the paper explores the relationship for us monthly inflation over 1926 to 1992 with various arfima garch type models it found that the inflation affected its uncertainty weakly negatively whereas the uncertainty affected the inflation insignificantly the results were robust to the high inflation period of the 1970s and the volatile period of 1929 to 1945 it supports engle s result that a high rate of inflation does not necessarily imply a high variance of inflation unlike friedman s view that a high rate of inflation leads to a high variance of inflation

rising cigarette prices and rising obesity coincidence or unintended consequence economists have begun to debate if the rise in cigarette prices in the u s in recent decades has contributed to the nation s rise in obesity reaching conclusions that are surprisingly sensitive to specification i show that allowing for the effect to occur gradually over several years leads to the conclusion that a rise in cigarette prices is actually associated with a long run reduction in body mass index and obesity this result is robust to the different methodologies used in the literature i also provide evidence that indirect effects on exercise and food consumption may explain the counterintuitive result

cigarette demand health scares and education in turkey the purpose of this paper is to examine the demand characteristics of cigarettes in turkey aggregate time series date for the 1960 88 period are used in estimation income and price elasticities of cigarette demand are obtained the effect of health warning is estimated to reduce cigarette consumption by about 8 since the inception of warnings in 1982 imports of cigarettes have been allowed since 1984 in addition to advertising of cigarettes in the non electronic media the effect of health warnings are found to be stronger than the opposing effect of advertising the results also suggest that public education about adverse health effects of smoking may be more effective in reducing consumption and less regressive on consumer incomes than raising the price of cigarettes

optimal urban employment policies notes on calvo and quibria we show that quibria s insightful observation on the efficacy of urban policy in a model with an urban trade union and an urban informal sector holds but with a revenue neutral employment tax subsidy combination levied on the urban employer we also draw the relevance of the generalized harris todaro model in providing intuition for the validity of this surprising result

effect of generic cigarettes on us cigarette demand and smuggling abstract this paper examines the effects of generic cigarettes on overall cigarette demand and smuggling and studies influences of casual and organized smuggling for the united states generic cigarettes lower the price elasticity and diminish the effect of formal smuggling

a two factor model to combine us inflation forecasts the combination of individual forecasts is often a useful tool to improve forecast accuracy the most commonly used technique for forecast combination is the mean and it has frequently proved hard to surpass this study considers factor analysis to combine us inflation forecasts showing that just one factor is not enough to beat the mean and that the second one is necessary the first factor is usually a weighted mean of the variables and it can be interpreted as a consensus forecast while the second factor generally provides the differences among the variables and since the observations are forecasts it may be related with the dispersion in forecasting expectations and in a sense with its uncertainty within this approach the study also revisits friedman s hypothesis relating the level of inflation with expectations uncertainty at the beginning of the twenty first century

the negative side of inflation targeting revisiting inflation uncertainty in the emu this article tests the friedman ball hypothesis for the european monetary union emu countries using a garch methodology the empirical results show a positive relationship between inflation and

excise tax avoidance the case of state cigarette taxes we conduct an applied welfare economics analysis of cigarette tax avoidance we develop an extension of the standard formula for the optimal pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions to provide a key parameter for our formula we estimate a structural endogenous switching regression model of border crossing and cigarette prices in illustrative calculations we find that for many states after taking into account tax avoidance the optimal tax is at least 20 smaller than the standard pigouvian tax that simply internalizes external costs our empirical estimate that tax avoidance strongly responds to the price differential is the main reason for this result we also use our results to examine the benefits of replacing avoidable state excise taxes with a harder to avoid federal excise tax on cigarettes

an embarrassment of riches confronting omitted variable bias and multiscale capitalization in hedonic price models abstract many researchers have addressed concerns of omitted variable bias in hedonic price models through the use of spatial fixed effects we argue that this approach does not consider the biases introduced by effects that overlap the zone of capitalization for nonmarket goods we show this bias can dominate the usual omitted variable bias using data on developer provided open space we control for multiscale capitalization and omitted variables simultaneously by extending the hausman taylor estimator where the panel component of the estimator is defined over repeated transactions within neighborhoods rather than the traditional definition following a unique cross sectional unit through time

a nearly global look at the dynamics of youth smoking initiation and cessation the role of cigarette prices this study investigates the role of cigarette prices on smoking initiation and cessation among youth in a sample of eight primarily non western low middle and high income countries with a particular focus on a subsample of 40 low and middle income countries lmics using split population duration models on longitudinally transformed individual data from the global youth tobacco survey gyts the average impact of cigarette prices in the presence of unobserved country heterogeneity and shifting cultural norms within countries is identified by the variation of cigarette prices within countries over time price increases are found to effectively reduce initiation in early youth and girls are considerably more responsive than boys the price elasticity of initiation in lmics is 0 82 for the combined gender analysis 0 46 for boys only and 1 5 for girls only there is some indication that youths in developing countries may be slightly less responsive to price changes than in high income countries no

efficient excise taxation the evidence from cigarettes we develop a model in which optimizing policy makers in adjacent government jurisdictions levy excise taxes on a commodity that has a unique point of production from which all shipments emanate from this model we derive an unusually specific predicted geographical pattern of those excise taxes in which these taxes rise at a decreasing rate as one moves outward from the point of production we compare these predictions to the observed pattern of cigarette taxes imposed by state governments in the united states and find the data to be fully consistent with our model among these predictions is the existence of a ripple effect which reduces taxes in many other jurisdictions due to low taxes at the point of production we estimate that these induced tax reductions in other states save cigarette producers and consumers a minimum of 110 million per year

demand for cigarettes revisited an application of the threshold regression model recent estimates of the income elasticity of cigarette demand have pointed to a disturbing result a nearly zero or sometimes negative income elasticity in order to explore the nonlinearity embedded in the cigarette demand structure we employ a four regime panel model dynamic fixed effect to estimate the cigarette demand function in the united states the results indicate that income elasticity is i positively significant for the income level less than 8 568 us ii positive but statistically insignificant for the income greater than 18 196 us and iii negatively significant for the income range between 8 568 and 18 196 us in addition we find that the price elasticity assumes the greatest absolute value for the income level in excess of 18 196 us but becomes most inelastic for the income level between 11 129 and 18 196 us

changing inflation dynamics and uncertainty in the united states garch estimation we investigate recent changes in the level persistence and uncertainty of u s inflation despite the great strides in lowering inflation in the 1980s and 1990s we find that uncertainty has risen palpably in the current decade this is disturbing given the aforementioned findings of the negative impact of inflation uncertainty on output moreover analyzing both the standard consumer price index cpi and the cpi minus energy our results suggest that volatile energy costs contribute to the higher inflation uncertainty in the united states in the current decade

the effects of excise taxes and regulations on cigarette smoking abstract we estimate a generalized linear model to examine adult and teenage cigarette demand our analysis focuses on the extent to which exice taxes and regulations restricting smoking in public places affect cigarette consumption the adult results indicate that the price elasticity of demand is unstable over time ranging from 0 06 in 1970 to 0 23 in 1985 these estimates are lower than most found in previous studies the teenage price elasticity does not differ statistically from the estimates for adults additionally regulations restricting smoking in public places have a significant effect on both adult and teenage cigarette demand

modelling the dynamics of market shares in a pooled data setting econometric and empirical issues the objective of this article is twofold first it is to study the applicability of the widely used autoregressive distributed lag model ardl in a pooled data setting second it is to analyse chile s market shares in the eu during the period 1988 to 2002 pointing to application problems that might jeopardize the model and searching for estimation methods that deal with the problem of inter temporal and cross sectional correlation of the disturbances to estimate the coefficients of the ardl model feasible generalized least squares fgls is utilized within the three stage least squares 3sls and the nonstandard generalized method of moments gmm frameworks a computation of errors is added to highlight the susceptibility of the model to problems related to the underlying model assumptions

stochastic volatility in a macro finance model of the u s term structure of interest rates 1961 2004 this paper generalizes the standard homoscedastic macro finance model by allowing for stochastic volatility using the square root specification of the mainstream finance literature empirically this specification dominates the standard model because it is consistent with the square root volatility found in macroeconomic time series thus it establishes an important connection between the stochastic volatility of the mainstream finance model and macro economic volatility of the okun friedman type this research opens the way to a richer specification of both macro economic and term structure models incorporating the best features of both macro finance and mainstream finance models

cigarette taxes and smoking restrictions impacts and policy implications the effects of recently proposed increases in cigarette excise taxes and smoking restrictions on tobacco prices and quantities quota lease rates and revenues to tobacco producing areas are analyzed the price elasticity of demand for u s cigarette exports is estimated proportionally similar increases in smoking restrictions or cigarette taxes are shown to have effects of similar magnitude on cigarette consumption a policy of reducing price instead of the quantity produced is found to minimize the impact of increased taxes and smoking restrictions on revenues to tobacco producing areas

tariffs foreign capital and immiserizing growth with urban unemployment and specific factors of production abstract in this note we show that a recent observation of brecher alejandro as regards tariff induced capital inflows essentially extends to a setting with urban unemployment three factors of production and a variety of labor market conditions in the urban sector

elasticities of beer demand revisited abstract this paper uses u s aggregate beer consumption data from 1964 1992 to empirically estimate the elasticities of demand for beer however rather than assuming the behavioral parameters are time invariant we estimate a gradual switching regression model that explicitly allows the elasticities to change over time results suggest that this more general model is warranted as findings illustrate the importance of variable dynamics when evaluating the efficacy of proposed policy alternatives

taxation smuggling and demand for cigarettes in canada evidence from time series data abstract this study analyzes canadian cigarette consumption and taxation between 1980 and 1994 a period in which there have been large price rises and declines and a dramatic increase in the consumption of contraband tobacco products we examine elasticities of legal cigarette sales and total sales including contraband with respect to the price of legal cigarettes and various other factors the growth of the contraband market since 1987 appears to have created two classes of cigarette taxed and untaxed with responses to changes in the legal price that are respectively higher and lower than was previously the case the sensitivity of total cigarette sales to the taxation instrument is much lower than it would appear from sales of taxed cigarettes alone

kalman filter and the demand for cigarettes kalman filter estimates of price income and advertising elasticities are presented an analysis of structural change in the demand for cigarettes in the us for the period 1929 86 is made estimated price and income elasticities are generally smaller and the advertising elasticity larger than estimates previously found cigarette demand is inelastic with respect to price and income and advertising elasticity is statistically insignificant for the most part furthermore both income and price elasticities decline over time while advertising elasticity tends to rise four time periods where structural change has occurred are identified the health scare reports and the fairness doctrine act have a significant impact on per capita cigarette consumption

the stability of cigarette demand the relative effects of various governmental interventions upon cigarette consumption is important to policy makers historically the demand for cigarettes has been quite unstable previous studie

firm behavior in a market with addiction the case of cigarettes abstract this paper investigates firm behavior when demand is linked over time among other things the theoretical section shows that if firms are forward looking anticipated future events can affect current consumption of an addictive good even when consumers are completely myopic the empirical part of the paper reports a simulation of the 1983 federal cigarette excise tax increase both myopic and rational models of consumer demand give roughly the same predictions for per capita consumption but neither model does very well predicting actual consumption the problem appears to lie in the prediction of price suggesting that supply considerations are important

advertising brand loyalty and pricing i consider an oligopoly model where prior to price competition firms invest in persuasive advertising and induce brand loyalty in consumers who would otherwise buy the cheapest alternative on the market this setting in which persuasive advertising is introduced to homogenous product markets provides an alternative explanation for price dispersion phenomena despite ex ante symmetry the equilibrium profile of advertising outlays is asymmetric it follows that endogenously determined brand loyal consumer bases are not symmetric across firms this raises a robustness question regarding varian s model of sales where symmetry is exogenously assumed

estimating dynamic demand for airlines this paper uses an original panel dataset with posted prices and sales to estimate a dynamic demand we find that consumers become more price sensitive as time to departure nears which is consistent with having lower valuations this result provides empirical support to a key theoretical implication in deneckere and peck 2012 high valuation consumers purchase earlier we also find that the number of active consumers increases closer to departure

smokeless tobacco smoking cessation and harm reduction an economic analysis good estimates place hard core smoking rates in the united states at approximately 25 with little change over the decade of the 1990s this paper examines the possibilities of harm reduction with the use of smokeless tobacco specifically using an econometric model we seek to determine whether an increase in the use of smokeless tobacco would lead to reduced smoking rates in the united states applying our model to the nhanes iii national health and nutrition examination survey we find that the use of smokeless tobacco by an average u s male smoker would increase the average probability of smoke cessation by over 10 approximately 3 million additional quits would result for 26 million smokers our study permits an examination of cessation by age groups and we find that males who use smokeless tobacco between 16 and 65 have a 10 14 probability of quitting but that the probability falls beyond age 66 important implications for life extension and health costs would attend these results with u

the impact of advertising regulation on industry the cigarette advertising ban of 1971 this article studies the impact of the 1971 tv radio advertising ban on the cigarette industry data indicate that industry advertising spending decreased sharply immediately following the ban but recovered and actually exceeded the preban level within five years a dynamic oligopoly model of advertising is developed to incorporate two potential explanations the estimated model fully accounts for the puzzling trend with 74 of the postban advertising spending increase explained by industry dynamics and 26 explained by learning furthermore this article uses the new concept of nonstationary oblivious equilibrium to handle intractable state space and accelerate equilibrium computation

causality between inflation and real growth abstract the paper investigates inflation growth causality over 1947 2005 with varma ml asymmetric vgarch the results imply that one uncertainty affects positively its level and much less negatively the other level whereas one level influences positively both uncertainties friedman s hypothesis was not strongly rejected

cigarette taxes and illicit trade in europe cigarettes are highly taxed in europe but at higher prices some consumers substitute more toward illicit cigarettes the illicit retail trade in cigarettes irtc includes counterfeit untaxed and smuggled cigarettes some existing literature includes claims that taxes are not an important determinant of irtc using data from the european union we find the opposite raising prices leads to substantial increases in irtc a 1 increase in tax pack is expected to increase illicit market share by 5 to 12 percentage points and increase illicit cigarette sales by 29 to 95 the results are robust to alternative specifications and data jel i18 h26 k42

demand for cigarettes in the united states effects of prices in bordering states and contiguity with mexico and canada based on a cross section of us states for 2004 this article estimates a demand function for cigarettes after including a proxy for prices in the bordering states and simple proxies for contiguity with mexico and canada and for being a major tobacco producer one major point seems to be that the negative elasticity for within state price is similar in magnitude to the positive elasticity for the lowest price in bordering states several additional points also seem noteworthy first having a border with mexico lowers sales in the state sizably second the share of hispanic latino population in the state also lowers sales significantly third contiguity with canada appears to have no significant effect fourth partial impact of the state being a major tobacco producer appears minor even though consumption in these states is considerably higher fifth education shows the expected negative association with cigarette consumption but its statistical significance is low last income carries a weak negat

clean air regulation and heterogeneity in us gasoline prices in order to improve public health in areas with air quality problems the us clean air act imposes a variety of federal regulations on gasoline which have led to a proliferation of fuel blends known as boutique fuels more than 45 fuel blends are sold nationwide we examine the effects of this program on wholesale gasoline prices the methodological innovation in this study is the use of a regulatory distance measure as a proxy for measuring market power that arises from product differentiation we find that clean air regulation increases gasoline prices by increasing the cost of refining but more importantly by creating regulatory islands it segments the market and increases the market power of firms our estimation controls for the potential endogeneity of the regulatory variables we find that ols techniques systematically underestimate the effect of regulation on gasoline prices

high and variable inflation further evidence on the friedman hypothesis abstract this study employing a garch model finds a positive and significant relationship between the level and variability of inflation this provides evidence in support of friedman s friedman 1977 view that high inflation leads to more variable inflation

optimal monetary policy under low trend inflation abstract in the monetary policy literature it is common to assume that trend inflation is zero despite overwhelming evidence that zero inflation is neither empirically relevant nor a practical objective for central bank policy we therefore extend the standard new keynesian model to allow for positive trend inflation showing that even low trend inflation has strong effects on optimal monetary policy and the dynamics of inflation output and interest rates under discretion the efficient policy deteriorates and there is no guarantee of determinacy even with commitment targeting non zero trend inflation leads to substantial welfare losses our results serve as a warning against indiscriminate use of models assuming zero trend inflation

estimates of the variance of u s inflation based upon the arch model it is generally agreed that the unpredictability of future inflation is a major component of the welfare loss associated with inflation perfectly predicted inflation might induce some costs through institutional rigidities governmental interference and transaction costs but in the long run these should be rather minimal as these institutions adopt various forms of indexing when inflation is unpredictable risk averse economic agents will incur a loss even if prices and quantities are perfectly flexible in all markets inflation is a measure of the relative price of goods today and goods tomorrow thus uncertainty in tomorrow s price impairs the efficiency of today s allocation decisions friedman in his nobel lecture 8 argues convincingly that higher variability of inflation would lead to decreased output ceteris paribus he then conjectures that higher rates of inflation are generally associated with higher variability of inflation and presumably greater uncertainty about future rates if this is true then higher rates of inflation would also be associated with low levels of output which implies a positively sloped phillips curve this paper uses a new statistical technique arch to estimate the conditional mean and variance of inflation from u s time series data the main finding is that the variance of inflation in the seventies was only slightly greater than in the sixties

a censored system of cigarette and alcohol consumption many previous studies of us cigarette and alcohol consumption have focused on single equations however the addictive nature of consumption suggests that it is more appropriate to model these products as a system we propose a two step estimation procedure and apply the procedure to a system of equations for cigarette beer and wine consumption results differ from those derived from an existing two step procedure findings suggest that consumption of cigarettes beer and wine is responsive to income changes but the elasticities are rather small personal physiques education age race ethnicity health gender employment status and regions also play significant roles in consumption

an empirical investigation of the dynamic effect of marlboro s permanent pricing shift the strategy philip morris adopted in 1993 featured a one time permanent publicly announced price cut an event referred to as marlboro friday little is known about the impact of permanent and publicly announced price cuts on consumer brand switching behaviors for an addictive product in the context of marlboro friday we investigate 1 how consumers brand choices are affected by a permanent price cut 2 whether differential and dynamic effects of permanent price cuts occur for different types of consumers and 3 the implications of publicly announced permanent price cuts on consumer brand switching behavior in the long run we develop a dynamic structural brand choice model that allows for consumer forward looking behavior learning and addiction and investigate how consumers adjusted their brand choice behaviors before and after this permanent price cut using unique consumer panel data pertaining to cigarette purchases before and after the event we provide behavioral explanations of whether and how the drastic and permanent price cut represented an effective step to encourage brand switching for an addictive product and a necessary step for philip morris to combat the growing market share of generic brands

taxation regulation and addiction a demand function for cigarettes based on time series evidence this work analyzes the effects of prices taxes income and anti smoking regulations on the consumption of cigarettes in california a 25 cent per pack state tax increase in 1989 enhances the usefulness of this exercise analysis is based on monthly time series data for 1980 through 1990 results show a price elasticity of demand for cigarettes in the short run of 0 3 to 0 5 at mean data values and 0 5 to 0 6 in the long run we find at least some support for two further hypotheses that antismoking regulations reduce cigarette consumption and that consumers behave consistently with the model of rational addiction

excise gap and price in the italian cigarette industry we provide evidence that tax shifts in the italian cigarette industry are not homogeneous across price categories and are associated with differences in the excise structure we take the gap betwee