The Effect of Prices and Taxes on Youth Cigarette and E-cigarette Use : Economic Substitutes or Complements?

We explore the effect of e-cigarette prices and an e-cigarette tax increase in Minnesota on youth use of e-cigarettes and cigarettes. Our price variation comes from 35,000 retailers participating in the Nielsen retail data system. We match this price and tax variation to survey data on current use of e-cigarettes and cigarettes for over 80,000 11-17 year olds from the National Youth Tobacco Survey (NYTS) for years 2011 to 2015. We find evidence that higher e-cigarette taxes and refill prices reduce youth e-cigarette use. Disposable e-cigarette prices reduce e-cigarette use for older teens. Cross-price/tax effects also support substitution between these two products. Our results suggest that taxing e-cigarettes may have an unintended consequence of increasing youth smoking intensity and that youth may continue obtaining nicotine following cigarette tax increases by using e-cigarettes