Summary
Using a simple model and state-level cross-section U.S. data from 1993 to 1999, quantile-regression estimates of price elasticity and income elasticity for cigarette demand are obtained. It is noted that price elasticity shows a sizable variation across the high and low quantity-quartiles. There is a similar variability in the income elasticity, but most of these estimates lack statistical significance. Besides providing an indication of the variation in the price (and income) elasticity for different consumption levels, the exercise suggests some interpretative caution in regard to estimates from constant-elasticity models.
See the full content of this document
Extract
Quantile-Regression Estimates of Cigarette Demand Elasticities for the United States
Introduction
Demand elasticities for cigarettes have been of considerable interest to scholars for a long time. These have some analytical significance and can also yield policy implications relative to taxation on cigarettes and regulation of the industry. The Centers for Disease Control and Prevention (CDC, 2000) and Chaloupka and Warner (2000) have provided extensive surveys of the relevant literature.In their useful meta-analysis, Gallet and List (2003) considered 523 price-elasticity estimates from 86 studies. While describing the wide variation in model specification, data coverage, and estimation procedure, they noted (p. 825) that most estimates were from a double-log specification, used quantity in per-capita terms, were based on time-series observations aggregate...See the full content of this document
Sponsored links
