Development of State-Specific Price Elasticity Estimates for Cigarette
Department of Health and Human Services
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7210 Pindell School Road, Fulton, MD, 20759
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Clinton E. Brown
AbstractPRINCIPAL INVESTIGATOR: Sung, Hai-Yen AWARDEE ORGANIZATION: HYS Consultants 532 Cornell Ave. Albany, CA 94706 TELEPHONE NUMBER: (510) 524-0298 AWARDEE NUMBER: 200-93-0664 Evidence has shown that increasing cigarette tax is a powerful tool to discourage cigarette consumption and to reduce the occurrence of tobacco related diseases. The effect of increasing tax on reducing consumption is measure by price elasticity. Most existing estimates for cigarette price elasticity are national estimates. Hypothetically, price elasticities may differ across states due to various state characteristics and across age-specific groups because of progression of addiction. Therefore, it is important to dervice state-wide and age-specific price elasticity estimates so that precise information about the effects of state tax changes can be provided. To utilize the elasticity estimates for state policy makers, a software needs to be developed to link these estimates with other data such as census estimates. This research will study the feasibility of developing such elasticity estimates and software by: (1) identifying the availability and completeness of state-wide and age-specific database, (2) proposing a "peer group" approach to derive elasticity estimates when database is insufficient, and (3) providing estimation test. The results of this study will provide a solid foundation for Phase II research and a template to study other addictive behavior such as alcohol consumption.
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