Effect of Cigarette Price and Tax Increases on Smoking in Europe: A Difference-in-Differences Study with Double Machine Learning

TL;DR

This study uses a difference-in-differences approach with double machine learning to estimate how cigarette tax and price hikes affect smoking rates across 27 EU countries from 2012 to 2020.

Contribution

It introduces a novel application of double machine learning in a difference-in-differences framework to analyze tobacco taxation effects.

Findings

Tax increases reduce smoking among monthly and daily smokers.

The effect is most significant among 15-24-year-olds.

Results are robust to different functional form assumptions.

Abstract

We estimate the effect of cigarette price and tax increases on smoking rates using Eurobarometer survey data from 27 European Union countries between 2012 and 2020. Following a difference-in-differences approach, we compare individuals exposed to large price and tax increases with those in stable price and tax environments. Estimation is based on a difference-in-differences estimator with double machine learning, which relaxes the functional form assumptions typically imposed by parametric approaches such as two-way fixed effects. Our results indicate that tax increases reduce smoking rates among individuals who smoke at least once per month and among daily smokers. The reduction is primarily driven by individuals aged 15-24. We examine the sensitivity of our findings to functional form assumptions and treatment definitions. While estimates are robust to alternative functional form assumptions, they are sensitive to whether the treatment is defined as binary or continuous.