The potential for using excise taxes to reduce smoking

Abstract

We examine the potential for reducing cigarette smoking through increases in cigarette excise taxes by estimating the price elasticity of demand for cigarettes. Using information on individual smoking behavior from the 1976 Health Interview Survey, we estimate the adult price elasticity of demand for cigarettes to be -0.42. We find that price has its greatest effect on the smoking behavior of young males and that it operates primarily on the decision to smoke rather than via adjustments in the quantity of cigarettes smoked. An excise tax increase would discourage smoking by successive cohorts of young adults, and those reduced smoking levels would be reflected in aggregate smoking as these cohorts mature.