title: [Cigarette prices, tobacco taxes and the proportion of contraband cigarettes in Germany].
abstract: Taxes on tobacco products are among the most efficient instruments against tobacco consumption and the arising cost of illness associated with them. The main argument of the tobacco industry against increases of excise taxes on cigarettes is a presumed substitution effect of smokers turning from consumption of legal cigarettes to smuggled ones. Besides deriving this proposition from the tobacco industry's own funded research, it has never been tested empirically. This article analyses the interdependence between contraband cigarettes and cigarette prices in Germany. Using VAR-modelling on the time-series of the variables of interest, we find no empirically valid correlation or causation between prices and untaxed contraband cigarettes. Furthermore, we find a positive relationship between contraband and legal taxed cigarettes, i. e., when the demand for legal cigarettes decreased in amount, so did the quantity of untaxed cigarettes. We conclude that the proposed relationship between prices and smuggled cigarettes as well as an overall substitution effect among smokers is non-existent. This has important implications for public health policy. The proposition that higher taxes on tobacco products incur social costs from increased smuggling activity cannot be corroborated empirically. Furthermore, this finding should encourage public health policy to keep using tobacco taxes as an instrument for prevention.
authors.affiliation: Institut für Recht der Wirtschaft, Universität Hamburg. Effertz@mba.uni-hamburg.de
authors.forename: T
authors.initials: T
authors.lastname: Effertz
authors.forename: R
authors.initials: R
authors.lastname: Schlittgen
mesh_terms: D003415:Crime / Q000191:economics* / Q000706:statistics & numerical data; D005858:Germany / Q000453:epidemiology; D006291:Health Policy; D006801:Humans; D007182:Income / Q000706:statistics & numerical data*; D015995:Prevalence; D012907:Smoking / Q000191:economics* / Q000453:epidemiology; D013660:Taxes / Q000191:economics* / Q000706:statistics & numerical data; D013844:Thiazoles; D019460:Tobacco Industry / Q000191:economics* / Q000706:statistics & numerical data; D062789:Tobacco Products / Q000191:economics* / Q000706:statistics & numerical data*
chemical_list: D013844:Thiazoles; C031363:2-aminothiazoline