NCJ Number
64253
Date Published
1979
Length
11 pages
Annotation
THE ECONOMIC IMPACT OF EFFORTS AGAINST CIGARETTE SMUGGLING IN MINNESOTA WAS ESTIMATED USING AN ECONOMETRIC MODEL DESCRIBING THE COMPONENTS OF THE MARKET FOR CIGARETTES.
Abstract
MINNESOTA HIRED TWO FULL-TIME SMUGGLING INVESTIGATORS IN JULY 1976 AND ANOTHER TWO IN 1977. DATA FROM BEFORE AND AFTER THE HIRING WERE USED TO ESTIMATE THE PROGRAM IMPACT. USING A SUPPLY EQUATION BASED ON PRODUCTION COSTS AND PRICE AND A DEMAND EQUATION BASED ON PRICE NET OF TAXES, TAX RATE, PERSONAL TASTES AND POPULATION, THE QUANTITY OF CIGARETTES SOLD WAS ESTIMATED. THE MODEL WAS USED TO FORECAST CIGARETTE TAX VOLUME. ACTUAL CIGARETTE TAX VOLUMES WERE COMPARED WITH PREDICTED VOLUMES. USING THE TWO STAGE LEAST SQUARES METHOD AND QUARTERLY DATA FROM 1968 TO 1976, THE MODEL PRODUCED LARGE PREDICTION ERRORS AND THUS MADE IMPOSSIBLE THE EVALUATION OF THE ANTISMUGGLING PROJECT. TWO ALTERNATIVE MODELS EITHER PRODUCED POORER RESULTS OR LACKED REQUISITE DATA. BECAUSE THE ANTISMUGGLING PROGRAM IS EXPECTED TO HAVE A MINIMAL IMPACT ON TOTAL TAX REVENUES, ITS EVALUATION IS IMPOSSIBLE. HOWEVER, THE MODEL CAN SERVE AS A CIGARETTE TAX REVENUE PREDICTOR WHICH INDICATES THE IMPACT OF CIGARETTE TAX RATES AND PRICE CHANGES. IT CAN ALSO GAUGE THE IMPACT OF CHANGES IN SMOKING REGULATIONS. FOR EXAMPLE, IT SHOWED THAT THE MINNESOTA CLEAN AIR ACT HAD NO SIGNIFICANT IMPACT ON CIGARETTE TAX REVENUES DURING ITS FIRST YEAR OF IMPLEMENTATION. THE MODEL HAS MANY POSSIBLE POLICY APPLICATIONS. TABLES, NOTES, AND REFERENCES ARE INCLUDED. (CFW)