Business, politics and cigarettes: an analysis of public policy interventions on cigarette sales
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Abstract
The American cigarette industry is again facing enormous pressure from various groups which have their goal to create a "smoke-free" society by the Year 2,000. This renewed effort to eliminate cigarette industry is actually the "Third Wave" of regulation which this industry has had to face in the twentieth century. The driving force behind this renewed interest in the hazzards of smoking has been sparked by the "passive smoking issue." The measures which the opponents of the cigarette industry propose are the traditional ones which have been employed in previous waves of regulation: advertising bans, smoking bans and excise tax increases. However, the present proposals are much more severe than those which were previously enacted at the federal level and are also being supported at the state and local levels of government. It is this role of the various states in regulating the cigarette industry which will become the basis for testing the effectiveness of the various public policy measures to discourage cigarette smoking. The data which this analysis is based upon consists of monthly cigarette sales data for all fifty states from 1967 to 1986. The methodology used to examine whether these measures had a negative impact on cigarette sales was ARIMA Time Series Intervention Analysis. The interventions which were studied included the TV and Radio advertising ban of 1971, the federal excise increase of 1983 as well as numerous state and local anti-smoking measures. The chief advantage of the ARIMA methodology was that it permitted the researcher to model exactly the type of intervention (gradual or abrupt) which a given measure had on a state's cigarette sales. One of the major findings of this research was that the only intervention which decreased cigarette sales significantly in the long run was an substantial increase in the cigarette excise tax of at least $.13/pack or greater. Two other major results also related to the imposition of excise taxes was that the pricing strategy of cigarette firms is related to the size of excise tax increases and that the pricing strategy of these firms does vary from state to state. The findings confirm the general proposition that state level as well as federal policies have a strategic impact on an industry's economic performance.
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Dissertation (D.B.A.)--Boston University
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