CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

Abstract: The main objective of this article is to examine the empirical effect of state and industry responses on consumption of cigarettes and petroleum in the United States from 1998-2012. Upon facing consumption choices, the consumer faces two competing sets of messages, one from the government and another from the industry. The objective of the state is to steer consumption in the right direction due to the harmful effects from consumption and asymmetric information among consumers. This is done mainly via taxation and state media expenditures. The industry, on the other hand, seeks to incentivize the public to ignore or reject state research and signals as well as maximizing net economic returns. This is mainly done via industry media and lobbying expenditures. We find that the main results indicate for cigarettes, industrial media and lobbying expenditure is statistically significant on consumption. For petroleum, we find that producer prices, state media expenditure and industrial lobbying expenditure are statistically significant on consumption. While significant results are mainly seen for media and lobbying expenditures, no significant results are seen for taxation.

Keywords: consumption; lobbying; prices; taxation; vector error correction model

JEL-codes: M30

27 pages, June 30, 2014

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