A University of Wisconsin Oshkosh economics professor is part of a team behind new research that could impact future vaping legislation.
Chad Cotti, economics department chair in the UW Oshkosh College of Business, is among the six researchers from six universities across the country who recently explored the consequences—intended or otherwise—of taxes on electronic cigarettes, or e-cigarettes.
The study, titled The Effects of E-cigarette Taxes on E-cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data, was funded by the National Institutes of Health and was published online last month by the National Bureau of Economic Research.
The key finding: When e-cigarette taxes are implemented, smokers tend to turn to traditional cigarettes.
Cotti
The group is made up of health economists with experience examining risk behaviors and consumer habits. Naturally they were drawn to vaping, with the tobacco alternative having exploded in popularity in recent years. The trend also hit after many years of smoking receding in American culture.
In response to the rise of vaping, e-cigarettes are the latest in a line of “sin activities,” like traditional tobacco and alcohol, to be considered for taxation by legislators. But because e-cigarettes are a surging substitute for cigarettes, possibly with fewer health consequences, things get complicated.
So Cotti and company went to work.
“If you tax e-cigarettes, what would the response be both in terms of e-cigarette consumption but also in terms of sales of traditional cigarettes?” he said. “Will people flow back to traditional cigarettes? And, if so, by how much?”
The researchers analyzed Nielsen Retail Scanner data from about 35,000 U.S. retailers from 2011 to 2017. At the time, eight states and two large counties had enacted e-cigarette taxes. What the data revealed is that for every 10% increase in e-cigarette prices, e-cigarette sales dropped 26% while sales of conventional cigarettes rose by 11%.
This research sheds new light on the relationship users have between the two types of nicotine products—one that’s relatively new to the market and another that, to the delight of those in the public health community, has been on the decline for decades.
“E-cigarettes and cigarettes are substitutes,” Cotti said, “but there’s a small preference for traditional cigarettes. So an e-cigarette is an OK substitute for a cigarette, but a cigarette is a great substitute for an e-cigarette.”
The research will soon be up for peer review before being published in an academic journal. From there, the results can be used by lobbyists, legislators and others and could play a role in future policy decisions.
“We’re happy that so many people find it to be useful information. You want your work to have some meaning and possibly inform the discussion,” Cotti said. “That’s what we’re hoping for—for the work to inform the discussion.”
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