Econometric Analysis of Cigarette Purchases on Native American Reservations

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PROJECT SUMMARY Cigarette taxation is a widely used tobacco control policy that can improve public health by discouraging smoking. Due to their legal status, Native American reservations (NARs) and First Nations reserves are important sources of lower- or un-taxed cigarettes in the U.S. and Canada. In some geographic areas and times, the prevalence of NAR purchases reaches over 40%. Data from the 2010-11 Tobacco Use Supplements to the Current Population Survey implies that 5.6 million smokers live in 7 states where the prevalence of NAR purchases is between 15% and 35%. The policy trend towards higher cigarette taxes means that tax avoidance through NARs is likely to grow substantially. The 2014 Surgeon General's Report, the CDC (2015), and the National Research Council Institute of Medicine (2015) stress the public health significance of, and need for additional research into, contraband cigarette markets including NARs. The project's broad goal is to study the impact of NAR cigarette availability on smoking, birth outcomes, and health disparities. Aim 1 is to conduct a quasi-experimental analysis of the impact of the availability of NAR cigarettes on adult smoking participation. We will analyze individual-level data on smoking from multiple large U.S. and Canada secondary data sets. Our econometric specification will test 4 hypotheses: 1) that state cigarette excise taxes reduce adult smoking; 2) that the impact of taxes on smoking varies depending upon the availability of NAR cigarettes; 3) that the availability of NAR cigarettes has a causal treatment effect to increase smoking; and 4) that the impacts of taxes and NAR cigarette availability on adult smoking varies with socioeconomic status. Aim 2 is to conduct a quasi-experimental analysis of the impact of the availability of NAR cigarettes on youth smoking participation, cigarettes smoked per day, and smoking initiation. We will test the 4 hypotheses listed under Aim 1 in the context of youth smoking. Aim 3 is to conduct a quasi-experimental analysis of the impact of the availability of NAR cigarettes on health outcomes and health disparities. We will test the 4 hypotheses listed under Aim 1 in the context of health outcomes. Aim 4 is to conduct a quasi-experimental analysis of the indirect effects of the availability of reservation cigarettes on the prices charged by off-reservation cigarette retailers. Our econometric analysis will test whether cigarette sales on nearby NARs is associated with lower cigarette prices and sales off-reservation. Aim 5 is to conduct a more structural econometric analysis of the impact of the availability of NAR cigarettes on individuals' joint decisions about smoking, purchase location, and cigarette price paid. We will estimate a structural endogenous switching regression model. The estimated model will directly estimate key mechanisms or links in the chain of causality: the impact of taxes and distance on the probability of NAR purchases; and the impact of NAR purchases on cigarette prices paid. X