This just in from the January 2013 issue of Public Finance Review:
“The Editor and the Editorial Board of Public Finance Review are delighted to announce that Ryan S. Sullivan and Donald H. Dutkowsky are the winners of the annual ‘Outstanding Paper Award,’ given for papers published in PFR in the year 2012.
Professor Sullivan received his doctorate in economics from Syracuse University and is currently a professor at the Naval Postgraduate School. Professor Dutkowsky received his PhD in economics from SUNY at Buffalo and is a professor in the Department of Economics in the Maxwell School of Citizenship and Public Finance at Syracuse University.
Their award-winning paper appeared in the November 2012 issue of PFR, and is entitled ‘The Effect of Cigarette Taxation on Prices: An Empirical Examination Using Local-level Data.’ The paper contributes important new empirical evidence on the incidence of taxation, focusing on cigarette taxes.
Professors Sullivan and Dutkowsky collect tax data from 443 municipalities and combine these data with local-level cigarette price data from the American Chamber of Commerce. They use these data to estimate the impact of city, county, and state excise cigarette taxes on cigarette prices, including the tax impacts on both generic and premium brands. Importantly, their theoretical and empirical framework allows for the possibility of overshifting.
Their empirical results indicate that excise taxes are overshifted to consumers both at the state and at the local levels; that is, a $1 rise in the state cigarette tax increases the price of cigarettes between $1.10 and $1.14 per pack, and a $1 rise in local taxes increases the price by $1.07 per pack. They find no significant difference in the incidence between generic and premium brands.
Also, they find that urban areas located near states with lower cigarette taxes tend to have lower cigarette prices relative to urban areas with higher taxes.”