Reservation Prices: An Economic Analysis of Cigarette Purchases on Indian Reservations / Philip DeCicca, Donald S. Kenkel, Feng Liu.

Format:

Book

Author/Creator:

DeCicca, Philip.

Contributor:

National Bureau of Economic Research.

Kenkel, Donald Scott, 1959-

Liu, Feng.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20778.

NBER working paper series no. w20778

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Reservation Prices

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

The special legal status of Indian tribes in the U.S. means that state excise taxes are not necessarily collected on cigarette purchases on Indian reservations. We focus on two under-studied but basic empirical economic questions this raises. Using novel data from New York surveys that asked directly about cigarette prices and purchases from reservations, we first ask: What is the economic incidence of the tax break? In data from New York over a period when the state did not attempt to collect taxes on reservation purchases, our estimates suggest that the tax break is usually fully shifted to the consumer. The notable exception is on one reservation where a tribal monopoly captures almost half of the tax break. Second, we ask: Has the tax break increased consumer demand for low-quality cigarettes relative to high-quality cigarettes? New York's cigarette tax is a fixed amount per pack, providing an opportunity to test the Alchian and Allen substitution theorem. We find some support for the prediction that the tax break increases consumer demand for lower-quality cigarettes.

Notes:

Print version record

December 2014.