Interstate cigarette bootlegging: Extent, revenue losses, and effects of federal intervention. NBER Working Paper No. 4763
Publication Source

National Bureau of Economic Research

Journal article
The Americas
Economy status
High-income economies
Download Link
Paid subscription article

In this paper, we develop and estimate a model of commercial smuggling in which some, but not all, firms smuggle a portion of the cigarettes they sell. The model is used to examine the effects on interstate cigarette smuggling of the Contraband Cigarette Act and a change in the federal excise tax. We find that both policies have unintentional effects. While the Contraband Cigarette Act was imposed to reduce interstate smuggling, we find it had the opposite effect. In contrast, an increase in the federal tax is not intended to affect smuggling, but we find it
increases the portion of cigarette sales that is commercially smuggled.