Cigarette prices, smoking, and the poor, revisited

Listed in:

• Adults' demand for tobacco products
• Price elasticity by SES
• Tax, price and tobacco use: Adults
• Tobacco use: The poor

Abstract

We read the provocative article by Franks et al. with great interest, because it concludes that since the 1998 Master Settlement Agreement (MSA) between states and tobacco companies, there has been a “dramatic decline in the effect of cigarette pack prices on smoking participation in both lower- and higher-income individuals.”1 We were impressed with the authors’ thoughtful analytic approach but remained skeptical because their results contradict a large body of previous research. A meta-analysis examined 523 estimates of price effects and confirmed the conventional wisdom that a 10% increase in cigarette prices leads to a 4% decline in smoking.2 Half of the 4% decline typically comes from declines in smoking prevalence and half from decreased consumption. Franks et al. note that some studies “have found that smokers in general and low-income smokers in particular may be relatively insensitive to cigarette pack prices.”1 However, a close examination of the 2 published studies3,4 and 1 working paper5 in question indicates that these studies also confirm that increases in cigarette prices reduce smoking and do not provide consistent evidence that lower-income individuals are less price responsive. Despite the careful approach by Franks et al., we urge caution for a number of reasons. First, we pursued the possibility the authors raise that the prices they used may have overstated actual prices by failing to capture price promotions after the MSA. Second, individual studies can produce varying estimates. We reanalyzed the data in Franks et al. with a few modifications. We included 2 additional years of data after the MSA and limit the pre-MSA period from 1990 to October 1998. Earlier years were dropped because too few states are represented in the BRFSS in the 1980s—as few as 15. In 1990, 45 states participated. We also examined the effects for 3 income groups: the lowest income quartile, the middle two income quartiles, and the highest income quartile. Aside from these differences, our analytic approach was nearly identical to that of Franks et al. Table 1 ▶ shows a statistically significant overall effect of cigarette prices on smoking prevalence before and after the MSA. These results do suggest that the size of the price effect has declined, but only among the middle and high income groups. A 10% increase in price would lead to a 0.9% decline in the prevalence of smoking overall, a 1.1% decline among the lowest income group, and a 0.6% decline in the 2 middle income groups. The latter effect is marginally statistically significant, although there is not a statistically significant effect for the highest income group.