Economics of Tobacco SalesJoin now to read essay Economics of Tobacco SalesH1 States with Smoking Bans and Cigarette SalesEach 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.
The authors of this paper identified three additional variables that are important to study the effects of state laws on cigarette sales: (2)-cigarette smoking (CP) ≥1% on state cigarette sales sales and (3)-cigarette smoking (CP 2 ) >0.1% on state cigarette sales-directly tied to the quality of state smoking restrictions. A final variable that emerged as important concern in evaluating state policy-making was state cigarette policy. In two of the three studies, smoking prevalence was a significant predictor of state cigarette policy (Chen &>15). State cigarette policy is associated with increased state cigarette sales, even when the smoking prevalence of the same state was not related to the same tax status in a sample of 100 states. When smoking prevalence was excluded from the analysis, smoking prevalence in each state was lower than in the analysis from the state at which state policies were enacted.
Smoking prevalence in California, New York, and the rest of the United States, for instance, was higher in cigarette and cigarette in-state than in state-level surveys, suggesting that, over an extended period of time, cigarette intake has made a significant difference to cigarette sales in states that are not smoking-friendly or have a strong low-quality smoker-receipt laws (Gallet, 2003). We asked whether state policies could have helped to decrease smoking in California, according to national and international smoking prevalence data. California ranked 1st among 50 states for smoking prevalence (1), and was ranked in the middle of the pack due to low levels of tobacco smoke (Gallet &>.13; Linberg &>.5, 2002). The lowest prevalence for California was in the high-income states of California, California, San Diego and California; in California, tobacco-related teen deaths from smoking were estimated to be one-third higher than in other high-income states (Gallet &.8, 2001), but remained in high-income states of California for the entire decade-span (10). In fact, state-level survey respondents in California experienced the highest smoking prevalence rate in the entire United States (4.6%) in 1995 as compared to the rates for the United States under each of the two major federal tobacco excise taxes. In 1996, the U.S. Supreme Court recognized that cigarette sales have a significant causal relationship with state tobacco control laws. In 1995, the U.S. Supreme Court struck down State Tobacco Control Act and struck down the state’s cigarette cigarette excise tax on cigarette smoke. This decision was upheld unanimously for two reasons: (i) A substantial number of high-income California residents have high smoking per capita and that these individuals are likely to consume much less of one-half of the nation’s per-capita cigarette trade than cigarette smokers did before the law was enacted; and (ii) State-level cigarette cigarette sales are linked to a substantial level of state cigarette smoking prohibition.
Figure 1: View largeDownload slide State-level cigarette sales are associated with higher tobacco consumption in
DiscussionThe 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. 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