Interstate Cigarette Bootlegging: Extent, Revenue Losses, and Effects of Government Intervention / Marie C. Thursby, Jerry G. Thursby.

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Thursby, Marie C

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4763.Publication details: Cambridge, Mass. National Bureau of Economic Research 1994.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: In this paper, we develop and estimate a model of commercial smuggling in which some, but not all, firms smuggle a portion of the cigarettes they sell. The model is used to examine the effects on interstate cigarette smuggling of the Contraband Cigarette Act and a change in the federal excise tax. We find that both policies have unintentional effects. While the Contraband Cigarette Act was imposed to reduce interstate smuggling, we find it had the opposite effect. In contrast, an increase in the federal tax is not intended to affect smuggling, but we find it increases the portion of cigarette sales that is commercially smuggled.

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Previous	nber w4760 Steel Protection in the 1980s: The Waning Influence of Big Steel? /	nber w4761 Toward a Modern Macroeconomic Model Usable for Policy Analysis /	nber w4762 How America Graduated from High School: 1910 to 1960 /	nber w4763 Interstate Cigarette Bootlegging: Extent, Revenue Losses, and Effects of Government Intervention /	nber w4764 Taxes and Fringe Benefits Offered by Employers /	nber w4765 What Ends Recessions? /	nber w4766 Mass Layoffs and Unemployment /	Next

June 1994.

In this paper, we develop and estimate a model of commercial smuggling in which some, but not all, firms smuggle a portion of the cigarettes they sell. The model is used to examine the effects on interstate cigarette smuggling of the Contraband Cigarette Act and a change in the federal excise tax. We find that both policies have unintentional effects. While the Contraband Cigarette Act was imposed to reduce interstate smuggling, we find it had the opposite effect. In contrast, an increase in the federal tax is not intended to affect smuggling, but we find it increases the portion of cigarette sales that is commercially smuggled.