Impact of domestic content requirement on the US tobacco and cigarette industries
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Using a log-linear equilibrium displacement model we quantify the impact of the recent domestic tobacco content requirement on US
cigarette manufacturing. We investigate effects on US growers and manufacturers, and competing tobacco imports. The policy increased
domestic use of US-grown tobacco, but induced a small negative output effect. Tobacco imports decreased substantially. The paper also
discusses the political-economic incentives for US manufacturers to comply with such policies. The political cooperation between US
growers and manufacturers decreases the opposition of the latter to protectionist policies championed by the former.