Cigarette Smuggling, Taxes, and Substitution Between Cigarettes and E-Cigarettes

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Dr. Dean Lillard, Department of Human Sciences
Rank at time of award: Professor

In the project, "Smoking, Vaping, and Substitution in Youth Risky Behaviors," we will develop evidence about the trajectory youth follow into smoking, vaping, and substitution between them. While there is great interest in the topic of factors that affect whether or not youth vape and smoke, data on vaping are limited to cross-sectional surveys. While cross-sectional data provide evidence about the prevalence of smoking and e-cigarette use, one needs longitudinal data to estimate patterns of initiation and cessation of cigarettes, e-cigarettes and substitution between them. Currently no large-scale longitudinal data sets exist. Here, we will collect primary data about use of cigarettes and e-cigarettes from an online panel known as the American Population Panel (APP). The Center for Human Resources Research at the Ohio State University administers the APP. In particular, we will collect data on lifetime cigarette, e-cigarette, and marijuana use of 3,000 APP panel members. The primary aim of this project is to collect data to support an R01 application we had previously submitted but that the full committee did not discuss. In the R01 we propose to measure the extent to which youth begin to use e-cigarettes and the interplay between vaping, traditional cigarettes, and marijuana use. Because no data exist to correctly estimate those relationships, we proposed to field a survey, the “Longitudinal Vaping and Smoking Study” to collect retrospective data on the use of each product. There are well-established methods which document that one can use such data to construct valid and reliable measures of life -course usage histories (Lillard 2015). Here, we propose to field a pilot project to collect data for a smaller sample. The aim of this pilot project is to generate a sample that we can use to a) generate baseline data, b) provide evidence on response rates, and c) generate preliminary data on individual patterns of initiation and cessation with a special focus on documenting whether and how individuals substitute between them.Ultimately, these data will support the R01 application.This topic is not only timely (given recent cases of death of people using vaping products) but also fundamental as a study of the determinants of youth and adult health. This study will focus in particular on estimating whether cigarette, e-cigarette, and marijuana taxes reduce the probability that youth smoke regular cigarettes, vape, and marijuana and whether those taxes influence probabilities of substitution between cigarettes and e-cigarettes. In economic terms, we will estimate the own-price and cross-price elasticities of demand and substitution. In pursuit of those statistical objects, we will combine the new data we collect with several unique data that promise to yield estimated elasticities that improve on existing published elasticities. In particular, we will use time-series data on the extent of smuggling of traditional cigarettes and local, state, and federal cigarette taxes. Existing studies ignore smuggling and local cigarette taxes. Our study is at the cutting edge of efforts to better understand the narrow and broader public health implications of the recently developed “electronic cigarettes” (or vaping devices). The new data allow promise better evidence on the short- and long-run health effects of cigarette and e-cigarette use because they mitigate omitted error bias and specification bias that pervades almost all published studies. We expect our findings to have a high impact because it will advance scientific knowledge, inform public health policies with significantly better evidence, and introduce significantly better data other researchers can use.