The micro-geography of tax avoidance: Evidence from littered cigarette packs in Chicago
Publication Source
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American Economic Journal: Economic Policy
Journal article
Metadata
Region
The Americas
Economy status
High-income economies
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Abstract
The large tax differentials between Chicago and neighboring jurisdictions provide an incentive for cigarette tax avoidance. Data from a random sample of cigarette packs littered in Chicago reveals a startling degree of tax avoidance: three-quarters did not display a Chicago tax stamp. Also, the $2.68 difference between the tax in
Chicago and surrounding counties decreases the probability of a local stamp by almost 60 percent, and a one mile increase in distance to the lower-tax state border increases the probability a pack of a local stamp by about one percent. These results are consistent with the predictions of economic theory.