Economics of Tobacco Sales


Length: 1614 words (4.6 double-spaced pages)
Rating: Excellent
Open Document
Need writing help? Check your paper »

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Text Preview

More ↓
H1 States with Smoking Bans and Cigarette Sales
Each year 440,000 people die, in the United States alone, from the effects of cigarette smoking (American Cancer Society, 2004). As discussed by Scheraga & Calfee (1996) as early as the 1950’s the U.S. government has utilized several methods to curb the incidence of smoking, from fear advertising to published health warnings. Kao & Tremblay (1988) and Tremblay & Tremblay (1995) agreed that these early interventions by the U.S. government were instrumental in the diminution of the national demand for cigarettes in the United States. In more recent years, state governments have joined in the battle against smoking by introducing antismoking regulations.
In a research article by Gallet (2004), several aspects of the clean indoor-air laws were closely examined. Set apart from other literature on the same topic, Gallet (2004) proposed that the degree of enforcement of these laws was just as important as the laws themselves. States that maintained the most restrictive clean-air laws encouraged much more competition within the cigarette industry; hence prices were adjusted closer to marginal cost which caused the availability of supply to increase (Gallet, 2004). Conversely, Keeler, Barnett, Manning, & Sung (1996) concluded that the price adjustment closer to marginal demand could be explained as an attempt to compensate for the reduction of demand caused by the antismoking laws. Regardless of the opinions of the papers on this aspect of the clean indoor-air laws, both agreed that state regulations that prohibit or limit smoking in public places decreased the cigarette demand.
Extraneous variables, excluding state smoking restrictions, may influence state cigarette sales. State cigarette sales may be influenced by “bootlegging,” identified as the crossing of state lines to purchase cigarettes in a state that sells cigarettes at a less expensive price (Gallet, 2004; Meier & Licari, 1997). Gallet (2004) identified “bootlegging” as Nprice, or the minimum neighbor state price ($). As stated previously, Gallet (2004) examined not only states with clean indoor-air laws, Clean1, but also the degree to which these laws were enforced within the individual states, Clean2. The consensus of the reviewed literature, those both including and excluding the extraneous variable, found that the institutions of state smoking bans affect cigarette sales.
Discussion
The results of this study are consistent with the overall literature’s findings (Gallet, 2004; Meirer & Licari, 1997) that states with smoking bans have a decrease in cigarette sales. However, caution is warranted in the true reliability of the data presented in this study, because of the nature of the data.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

How to Cite this Page

MLA Citation:
"Economics of Tobacco Sales." 123HelpMe.com. 12 Dec 2017
    <http://www.123HelpMe.com/view.asp?id=63515>.
Title Length Color Rating  
The Economics of Illicit Drugs Essay - In this essay I will define drug abuse and show the economic impact of the sales of illicit drugs. I will introduce an argument for legalization and the impact to the economy. Next I will discuss some of the economic cost from lack of productivity, health care cost and other cost associated with Drug abuse. In order to understand the economic impact of illicit drugs we must first define what a drug is. A drug is defined as any substance other than food that affects the way your mind or body works....   [tags: Crime and Drugs]
:: 3 Works Cited
1305 words
(3.7 pages)
Better Essays [preview]
Sin Taxes Affect the Cost of Health Care Prices Essay - ... Individuals may pay directly for services received. Others may have health insurance coverage as a tax free benefit from their employment. Military personnel and their dependents, as well as veterans, are provided health care coverage through the federal government. Older Americans depend upon Medicare and low income mothers and children, as well as some disabled persons in the U.S., receive health care assistance through Medicaid.” (“The U.S.” nlm.nih.gov) The men and women who do not pay for their health care directly will probably not be affected by a rise in “sin taxes” unless they are heavy smokers or drinkers....   [tags: alcohol, tobacco, consumers]
:: 6 Works Cited
585 words
(1.7 pages)
Good Essays [preview]
Essay on Global Markets, Represented Through Food - The components of the meals I chosen are: steak, green peppers, onions, rice, and for the second meal, pasta, hamburger, and spaghetti sauce. The rice came from China, and the pasta originated from Italy. Rice comes from the rice plant. It originated in China, grown on flooded terraces, and became a part of all Asian cultures, not just the consumption of it, but also the backbreaking work associated with it and the seasonal happenings such as monsoons. Hamburger was originated in Hamburg, Germany....   [tags: Economics]
:: 3 Works Cited
1321 words
(3.8 pages)
Strong Essays [preview]
Essay on The Benefits of Progressive Taxation - Thousands of years ago, in ancient Athens, the city was relatively a paradise, they had civilization, they had theater, they had the arts; they also had an absolute flat tax, everyone paid the exact same tax. If a citizen did not pay the tax, he or she would be sent outside the city which was likely a death sentence. For the vast majority of people, this tax was their greatest burden and caused terrible social problems. For centuries, ancient Athenians explored this issue and discovered a moral insight; there is no economic gain without civilization....   [tags: Economics] 1933 words
(5.5 pages)
Strong Essays [preview]
CVS Halts Cigarette Sales Essay - The CVS has decided it wants to halt cigarette sales. Cigarette smoking is very injurious to health. However, the government hasn’t stopped producing tobacco because of its economical benefits. This is an interesting topic for analyzing the changes it would bring to the economy of a country and whether it’s a good decision or not. Smoking is a personal choice for everyone; however in the long run it has an effect on the economy. There are many reasons why I think this decision will be more destructive than beneficial....   [tags: smoking, tobacco industries, health] 570 words
(1.6 pages)
Good Essays [preview]
The Nordic Model Essay - No matter how successful the Nordic Model may be in producing and expanding human welfare it will always be subject to attack as long as human nature remains at its current state of evolution. -The Nordic News Network Scandinavia is a region of Northern Europe that includes Sweden, Denmark, Norway, Finland, and Iceland. All the countries of Scandinavia share similar languages, are ethnically homogeneous, and are known to be punctual, honest, and modest. While each country does have its differences, they all have one major thing in common: the Nordic Model....   [tags: Economics]
:: 7 Works Cited
1172 words
(3.3 pages)
Strong Essays [preview]
Secondhand Smoking Essay - “A blockbuster study published in the January issue of the Journal of the American Medical Association (JAMA) examined the impact of exposure to ETS on the progression of athersclerosis (hardening of the arteries) and concluded, in part, that the arteries of non-smokers exposed to ETS thickened 20% faster than non-smokers with no second-hand exposure” (JAMA). Another study published in Pediatrics in January estimated that, “about half of the cases of early childhood cases of asthma, chronic bronchitis and wheezing are attributable to exposure to secondhand smoke” (JAMA)....   [tags: Tobacco Nicotine Smoking Cigarettes] 1802 words
(5.1 pages)
Strong Essays [preview]
The History of Tobacco Essay - ... It was closely observed that this crop was easy to grow, trade, and use for personal enjoyment. The tobacco economy in the early colonies was a cycle of leaf demand, slave labor demand, a global industry that eventually led to the rise of the Chesapeake Consignment system, which means American tobacco farmers would sell their sell their crops to merchants in London but still retain ownership until the goods were sold or the person was transferred. Contracts were also drawn up with wholesalers in Charleston and New Orleans to ship the tobacco to London merchants, after which the loans would be repaid with profits from the sales....   [tags: tobacco economy, colonists, europe] 729 words
(2.1 pages)
Better Essays [preview]
Essay about Improving a Deficit in the Balance of Payments - Discuss the alternative policies a government may use to improve a deficit in the Balance of Payments (BOP) There are many ways a government can improve a deficit of the BOP. First we must define the key terms. A deficit is the falling short of revenue as compared with expenditure; the amount of this deficiency; the amount required to make assets balance liabilities. The Balance of payments is a record or overall statement of a country’s economic transactions with the rest of the world, usually over a year....   [tags: Economics] 978 words
(2.8 pages)
Strong Essays [preview]
Economics Essay -      Definition of Topic: Economics is the study of supply and demand. It defines the ways that human beings allocate resources and how resources are distributed amongst a market. It allows you to see trends in current market places and predict what may happen in the future. Many different subjects were once regarded as a part of economics. Political science and even sociology were once considered part of the field. These subjects still play a major role in understanding economics but are also completely separate disciplines today....   [tags: Understanding Economics Essays]
:: 2 Works Cited
1694 words
(4.8 pages)
Better Essays [preview]

Related Searches




The data is representative of only two years; the lack of longitudinal information makes it difficult to gage the reliability of the results as a predictor of previous or future year’s cigarette sales. Another limitation of the data is that extraneous events, such as the degree of law enforcement, severity of punishment, or “bootlegging” where not considered as factors. Note, however, the decision to not include “bootlegging” and degree of enforcement in the parameters of this study was a conscious one. We felt that the presence of the “bootlegging” affect was apparent both before and after state smoking bans were established and therefore determined it was unnecessary to account for this activity. It was also determined that the level of enforcement was unrelated to our hypothesis. Regardless of any limitations to this study, the overall results were in agreement with the majority of literature available on the same topic.
A limitation noted of the literature was the lack of specific data prior to and immediately following the employment of state smoking restrictions. While Gallet (2004) closely examines the results of states cigarette sales following the introduction of state smoking laws, he lacks a direct comparison to sales prior to the laws. The deficient amount of collective data makes it problematical to clearly isolate the direct effect of the antismoking laws.
Implications of this study conclude that if it is the intention of states to reduce the amount of cigarettes sold, and therefore consumed, the introduction of legislation limiting or banning smoking in public places will appear in an increased amount of states across the country. In accordance with Kao & Tremblay (1988) and Tremblay & Tremblay’s (1995) testimony of the importance of the early U.S. government involvement in cigarette dealings, thus decreasing the demand for the product, we propose the same significance of state antismoking laws.
The results of the present analysis of the hypothesis’ findings are consistent with the literature in that institutions of state smoking bans affect cigarette sales. It was shown in the literature, as well as in the present analysis of the hypothesis, that the presences of state smoking bans reduce cigarette demand.






H4 States with Smoking Bans and Cigarette Tax Revenue
One in five of all deaths each year in the United States have been attributed to smoking, killing more than AIDS, suicide, alcohol, car accidents, homicide, and illegal drugs combined (American Cancer Society, 2004). As discussed by Bishop & Yoo (1985) a 1964 Surgeon General’s report, warning of the adverse health affects of smoking, led to a reduction in cigarette sales. Prior to this report taxes placed on cigarettes were intended for the sole purpose of raising revenue. After the Surgeon General’s report, however, taxes were placed on cigarettes for an additional reason, to discourage cigarette smoking (Meier & Licari, 1997).
The concept of cigarette tax derives from economic theory. A higher selling cost of cigarettes has been a direct cause of increased cigarette taxes, and as the law of supply and demand implies, fewer cigarettes will be sold (Meier & Licari, 1997). A long-standing assumption of the economic theory stated above was that an increase in cigarette tax would lower sales and thereby hurt the economy. However, according to a report by Jha, Beyer, and Heller (1999) an increase in cigarette tax actually raised cigarette tax revenue hence, causing zero harm to the economy. Tax revenue serves as the government income due to taxation. Therefore, as cigarette taxes increase so does the government income.
Since 2000, thirty-one states have increased cigarette taxes (Capehart, 2004), and additional researched has discovered these thirty-one states have also implemented smoking bans (Smoke Free World, 2005). Studies have shown that increased cigarette taxes have reduced the amount of cigarettes consumed by individuals (Brown, 1995; Meier & Licari, 1997; and Showalter, 1998). Conversely cigarette tax revenues have increased as higher taxes have been placed on cigarettes (Capehart, 2004). Most literature reviewed has considered cigarette taxes and cigarette tax revenues without regard for states with smoking bans.
Discussion
From a synthesized perspective, the results of our study both coincide and differ with that of the literature (Brown, 1995; Capehart, 2004; Gallet, 2004; Meier & Licari, 1997; and Showalter, 1998). We coincide with Meier & Licari (1997) and Gallet (2004) that states with smoking bans and increased cigarette taxes have decreased cigarette sales, and differ with Showalter (1998) that states with higher cigarette taxes yield higher tax revenue. Limitations of the literature however were apparent in the absent correlation between states with smoking bans and tax revenue. While tax revenue was compared and contrasted against the amount of taxes placed on cigarettes the smoking laws were never considered.
The aspect which extends the research of our study from previous studies has been the examination of the affect states with smoking bans have on tax revenue. We introduce an innovation of thought. One may imply that states with smoking bans, which results in a decrease in cigarette sales, would have decreased tax revenue thus, adversely affecting the economy. We set out to prove the economic theory of supply and demand in relationship to state antismoking laws and state cigarette tax revenue. Our goal was to; first, determine if states with smoking bans affected cigarette tax revenue, and secondly, to determine if the affect was either positive or negative. Our results indicate that there is a negative affect on cigarette tax revenue caused by state smoking restrictions, concluding that tax revenue continued to decreases after the states issued the smoking bans.





















References
American Cancer Society. Cancer Facts & Figures 2005. Atlanta, Ga: American Cancer
     Society; 2005.
Bishop, J. A. and J. H. Yoo. 1985. “Health Scare, Excise Taxes and Advertising Ban in
     the Cigarette Demand and Supply.” Southern Economic Journal 52: 402-411.
Brown, A. B. 1995. “Cigarette Taxes and Smoking Restrictions: Impacts and Policy     Implications.” American Journal of Agricultural Economics 77: 946-952.
Capehart, T. 2004. “The Changing Tobacco User’s Dollar.” Economic Research     Service/USDA [On-line]. Available: www.ers.usda.gov
Gallet, C. A. 2004. “The Efficacy of State-Level Antismoking Laws: Demand and Supply     Considerations.” Journal of Economic and Finance 28: 404-412.
Kao, K., and V. Tremblay. 1988. “Cigarette Health Scare, Excise Taxes, and Advertising     Ban: Comment.” Southern Economic Journal 54: 770-775.
Keeler, T., T. Hu, P. Barnett, W. Manning, and H. Sung. 1996. “Do Cigarette Producers     Price-Discriminate by State? An Empirical Analysis of Local Cigarette Pricing     and Taxation.” Journal of Health Economics 15: 499-512.
Meier, K. J., and Licari, M. J. 1997. “The Effect of Cigarette Taxes on Cigarette     Consumption, 1955 through 1994.” American Journal of Public Health 87: 1126     1130.
Prabhat, J., Beyer, J., and Heller, P. S. 1999. “Death and Taxes; Economics of Tobacco     Control.” Finance and Development 36 [On-line]. Available:          http://www.imf.org/external/pubs/ft/fandd/1999/12/jha.htm

Scheraga, C., and Calfee, J.E. 1996. “The Industry Effect of Information and Regulation     in the Cigarette Market: 1950-1965.” Journal of Public Policy and Marketing 15:     216-226.
Showalter, M. H. 1998. “The Effect of Cigarette Taxes on Cigarette Consumption.”     American Journal of Public Health 88: 1118-1119.
Townsend, J. 1998. The role of taxation in tobacco control. In I. Abedian (Eds.), The     Economics of Tobacco Control. Cape Town, South Africa: University of Cape     Town.
Tremblay, C., and V. Tremblay. 1995. “The Impact of Cigarette Advertising on     Consumer Surplus, Profit, and Social Welfare.” Contemporary Economic Policy     13: 113-124.


Return to 123HelpMe.com