Question

E

E. After South Carolina increased cigarette taxes from $1 per pack in 2011 to $2 per pack in 2012, cigarette consumption decreased from 100,000 packs per month to 90,000 packs. However, in Georgia, where there was no cigarette tax change, cigarette consumption fell from 150,000 in 2011 to 145,000 in 2012. 1. Calculate the difference-in-differences estimator for the impact of the tax change in South Carolina? 2. Discuss what assumptions you must make for your DD estimate to be interpreted as causal

Answer 1

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