Topic: Miller College of Business

August 29, 2018

Raising taxes on cigarettes reduces nicotine use, even for e-cigarettes, and increases sales of smoking cessation products, says a Ball State researcher.

Erik Nesson, a Ball State economics professor, found that a $1 cigarette excise tax increase reduces the probability that a household purchases e-cigarette products by about 22 percent and cuts the number of e-cigarette product purchases by about 42 percent. The tax also leads to an 18 percent increase in the probability that a household buys smoking cessation products.

“When cigarette taxes increase, people smoke less, cutting back on buying both cigarettes and e-cigarettes,” he said. “That was a surprise. We thought that people would cut back on cigarettes and increase purchases of the electronic option, but that doesn’t seem to be happening.

“Our results also indicate that, at least among adults, more stringent e-cigarette restrictions are unlikely to affect either cigarette or e-cigarette consumption. Furthermore, cigarette tax increases are likely to reduce nicotine intake from both cigarettes and e-cigarettes.”

Nesson joined with faculty from the University of Wisconsin-Oshkosh and Bates College to conduct the study, “The Relationship between Cigarettes and Electronic Cigarettes: Evidence from Household Panel Data.”

The research, published by Journal of Health Economics, is the first to examine how increases in cigarette excise taxes and smoke-free air laws (SFA laws) affect sales of e-cigarettes products among adults. Researchers tracked the purchases of households before and after increases in cigarette taxes and SFA laws using the Nielsen Consumer Panel (NCP) between the years of 2011 and 2015. The overall sample represents about 99,000 households.

“We confirm many previous studies that also find cigarette excise taxes and SFA laws reduce smoking,” Nesson said.

Nesson said the study’s results suggest potentially important implications for tobacco control policy.

“Estimates indicate that cigarette taxation remains a critical tool for controlling nicotine consumption and addiction,” he said. “Nevertheless, it is important for policymakers to understand the relationship between cigarettes and e-cigarettes.”