We conduct an applied welfare economics analysis of cigarette tax avoidance. We develop an extension of the standard formula for the optimal Pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions. To provide a...

Many policy makers continue to advocate and adopt cigarette taxes as a public health measure. Most previous individual-level empirical studies of cigarette demand are essentially static analyses of the relationship between the level of taxes and smoking behavior at a point in time. In this...