Price Elasticity Under Rate Structure Change and Low-Income Discounts in California

2013 ◽  
Author(s):  
Stephanie A. Tanverakul ◽  
Juneseok Lee
Keyword(s):  
Price Elasticity ◽  
Low Income ◽  
Structure Change ◽  
Rate Structure

2016 Poverty Reduction and Growth Trust - Review of Interest Rate Structure

Policy Papers ◽  
2016 ◽  
Vol 2016 (50) ◽  
Author(s):  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Low Income ◽  
Poverty Reduction ◽  
Low Income Countries ◽  
Credit Facility ◽  
Rate Structure ◽  
Low Interest Rates ◽  
The Interest Rate ◽  
Rate Mechanism

This paper reviews the interest rate structure that would apply to the PRGT in 2017–18. Based on the interest rate setting mechanism agreed in 2009, the interest rate for the Extended Credit Facility (ECF) would be zero and the rate for the Standby Credit Facility (SCF) would be 0.25 percent. The interest rate for the Rapid Credit Facility (RCF) was set permanently at zero in July 2015. Since the current mechanism was agreed, the Executive Board has granted successive exceptional interest waivers on all outstanding Fund concessional credit, setting all interest rates charged at zero percent. These waivers have been extended three times, providing interest rate relief to many low-income countries at a time when they faced considerable headwinds from the global economic environment. A strong case remains for maintaining zero rates on Fund concessional credit at the current global economic juncture. The global outlook for LICs has not significantly improved since the last review and downside risks remain significant. At the same time, many Directors noted at the last review in 2014 that the possibility of a prolonged period of very low interest rates warrants an early re-examination of the mechanism, including an exit strategy from repeated application of the waiver, with the objective of safeguarding the self-sustaining capacity of the PRGT. The paper seeks to respond to this call. It proposes that the PRGT interest rate mechanism be amended to accommodate anomalies created by a prolonged period of very low interest rates. Specifically, a new threshold is proposed whereby both the ECF and the SCF rate would be set at zero when the 12-month average SDR rate is less than or equal to 0.75 percent. This proposal will likely keep all PRGT interest rates under the mechanism at zero through at least 2020 given current market expectations while incurring only minimal subsidy costs and eliminating the need for continual waivers. In addition, staff proposes to waive interest rate charges on outstanding legacy balances under the Exogenous Shocks Facility (ESF), which are not determined via the interest rate mechanism, until the next review.

scholarly journals Tobacco price elasticity in Serbia: evidence from a middle-income country with high prevalence and low tobacco prices

2020 ◽  
Vol 29 (Suppl 5) ◽  
pp. s331-s336 ◽  
Author(s):  
Marko Vladisavljevic ◽  
Jovan Zubović ◽  
Mihajlo Đukić ◽  
Olivera Jovanović
Keyword(s):  
Price Elasticity ◽  
Low Income ◽  
Tobacco Consumption ◽  
Reliable Estimate ◽  
Demand Model ◽  
Middle Income ◽  
Middle Income Countries ◽  
Tobacco Taxes ◽  
Tobacco Tax ◽  
High Prevalence

In this paper, we use Deaton’s demand model and Household Budget Survey data from 2006 to 2017 to provide a first robust and reliable estimate of cigarettes price elasticity for Serbia. The case of Serbia is particularly interesting and important as it provides evidence for a country in which tobacco market is characterised by the high tobacco consumption, low prices and large perceived impact of multinational tobacco companies on public revenues, export and employment, given their considerable cigarette production in Serbia. The price elasticity of cigarettes is estimated at −0.639, in line with the previous estimates for the low-income and middle-income countries. Estimated negative cigarettes price elasticity for Serbia suggests that tobacco tax policy could be used effectively to reduce cigarette consumption in Serbia, which could lower the harmful health effects of cigarettes. Furthermore, a calculation based on the estimated elasticity suggests that increasing tobacco taxes could also have positive fiscal effects, as the expected revenue from the taxes would increase.

scholarly journals Estimating the price elasticity of demand for cigarettes in South Africa using the Deaton approach

BMJ Open ◽  
2021 ◽  
Vol 11 (12) ◽  
pp. e046279
Author(s):  
Chengetai Dare ◽  
Micheal Kofi Boachie ◽  
Ernest Ngeh Tingum ◽  
S M Abdullah ◽  
Corné van Walbeek
Keyword(s):  
South Africa ◽  
Price Elasticity ◽  
Low Income ◽  
National Income ◽  
Evidence Base ◽  
Middle Income ◽  
Excise Tax ◽  
Illicit Trade ◽  
Elasticity Of Demand ◽  
Price Elasticity Of Demand

ObjectiveTo estimate the price elasticity of demand for South Africa and thereby contribute to growing the evidence base of the likely impact of excise taxes on cigarette demand in low-income and middle-income countries.MethodsWe employ the Deaton method, using wave 5 data from the South African National Income Dynamics Study, to estimate the cigarette price elasticity for South Africa. We used a sample of 6820 households.ResultsOf the 6 820 households in the sample for which we had sufficient data, 1341 (19.7%) spent money on tobacco. The price elasticity of demand for cigarettes is estimated at −0.86 (95% CI −1.37 to −0.35), implying that the demand for cigarettes in South Africa declines by 8.6% for every 10% increase in price.ConclusionThe negative price elasticity estimate for South Africa indicates that increases in the excise tax are particularly effective in controlling cigarette consumption. However, given the presence of a significant illicit tobacco market in the country, it is important that authorities augment tax measures with strategies that curb the illicit trade in cigarettes.

scholarly journals Impact of Taxation Policy on Household Spirit Consumption and Public-Finance Sustainability

2019 ◽  
Vol 11 (20) ◽  
pp. 5858 ◽  
Author(s):  
Tanja Laković ◽  
Ana Mugoša ◽  
Mirjana Čizmović ◽  
Gordana Radojević
Keyword(s):  
Sustainable Development ◽  
Price Elasticity ◽  
Low Income ◽  
Control Variable ◽  
Middle Income ◽  
Excise Tax ◽  
Taxation Policy ◽  
Road Map ◽  
Working Age ◽  
Complementary Goods

The objective of this study was to estimate the sensitivity of spirit quantity demanded for price and income changes in Montenegro and to show the effectiveness of taxation-policy changes in the reduction of spirit consumption. It is the first study on this topic in Montenegro, where adverse effects of alcohol are recognized as an important obstacle in achieving Sustainable Development Goals (SDGs). The price elasticity of spirits was estimated using Deaton’s methodology on the Household Budget Survey (HBS) data in the period of 2006–2017. Cigarettes were included as a control variable as, along with spirits, they are one of the most harmful substances used in Montenegro. Using these results, we simulated the effects of spirit use on public revenue. The results show that the spirits’ own price elasticity equaled −0.45, while the cross-price elasticity equaled −0.17, showing that spirits and cigarettes are complementary goods. These results, along with elasticities calculated by sex (male, −0.55; female, −0.5), income groups (low income, −1.16; middle-income, −0.46; high-income, −0.26), and for the working-age group (−0.74), demonstrate that an increase in excise taxes could be a very efficient tool in decreasing the adverse effect of spirits and cigarettes on household member’s productivity, health, and budget, which is in line with SDGs. An efficient road map for sustainable development for Montenegro must include the reduction of health-harmful substance use through excise tax increase.

Price elasticity of demand for manufactured cigarettes and roll-your-own cigarettes across socioeconomic status groups in Thailand

2020 ◽  
pp. tobaccocontrol-2019-055480
Author(s):  
Jintana Jankhotkaew ◽  
Siriwan Pitayarangsarit ◽  
Surasak Chaiyasong ◽  
Kamolphat Markchang
Keyword(s):  
Socioeconomic Status ◽  
Price Elasticity ◽  
Low Income ◽  
Price Change ◽  
Tobacco Consumption ◽  
High Price ◽  
Elasticity Of Demand ◽  
Price Elasticity Of Demand ◽  
Pricing Policies ◽  
Different Types

BackgroundPricing policies have been proven to be effective in reducing tobacco consumption. However, studies investigating the effectiveness of pricing policies across different types of tobacco products and socioeconomic status (SES) groups are limited, particularly in low-income and middle-income countries.ObjectiveThis study aimed to quantify the price elasticity of demand for different types of cigarettes across different SES groups.MethodsThis study used data from a nationally representative survey in Thailand conducted in 2017 and included current smokers aged at least 15 years. To quantify the price elasticity of demand for cigarette consumption, a two-part model was employed for five different types of cigarettes: domestic and imported manufactured cigarettes with a low and high price, and roll-your-own cigarettes. Personal income was used to determine SES.ResultsPrice elasticity of demand for cigarettes exists for all types of cigarettes. The price elasticity of demand for manufactured and roll-your-own cigarettes was −0.49 (p<0.05) and −0.32 (p<0.05), respectively. People who smoked domestic manufactured cigarettes were more responsive to price change than those who smoked imported manufactured cigarettes. Low-income smokers of manufactured and roll-your-own cigarettes were more responsive to price change than those with high income.ConclusionSmokers with a low income were more responsive to price change than those with higher income. The effectiveness of pricing policy in reducing demand for manufactured cigarettes was greater in domestic cigarettes than imported ones.

scholarly journals Poverty Reduction and Growth Trust-Review of the Interest Rate Structure-Postponement

Policy Papers ◽  
2019 ◽  
Vol 19 (21) ◽  
pp. 1
Author(s):  
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Low Income ◽  
Poverty Reduction ◽  
Low Income Countries ◽  
Second Stage ◽  
Rate Structure ◽  
The Interest Rate

This paper proposes to postpone the deadline for the next interest rate review by six months in light of the timing of the second stage of the Low-Income Countries (LIC) Facilities Review, and to maintain the zero percent interest rates applicable to ECF, SCF and ESF balances for this period.

scholarly journals Accelerating progress on effective tobacco tax policies in Montenegro

2020 ◽  
Vol 29 (Suppl 5) ◽  
pp. s293-s299
Author(s):  
Ana Mugosa ◽  
Mirjana Cizmovic ◽  
Tanja Lakovic ◽  
Milenko Popovic
Keyword(s):  
Time Series ◽  
Price Elasticity ◽  
Low Income ◽  
Direct Impact ◽  
Demand Model ◽  
Middle Income ◽  
Aggregated Data ◽  
Distributed Lag ◽  
Tobacco Tax ◽  
Short Run

BackgroundThe objective of this study is to estimate the sensitivity of cigarette quantity demanded to price and income changes in Montenegro.Data and methodsThe sensitivity of cigarette quantity demanded to price and income changes was estimated using micro and macro analysis. Micro analysis implied the use of Deaton’s model on Household Budget Survey data (2006–2017). In macro analysis, conventional static demand model is applied using error correction and autoregressive distributed lag time series methodology on annual time series aggregated data (2001–2017).ResultsThe same results were obtained using micro and macro analysis which contributes to the objectivity of the conducted research. Results derived from the Deaton’s model indicate a negative price elasticity of cigarettes in the range between −0.62 and −0.80 (conditional and unconditional), while in macro model estimated price elasticity is in that range and equals −0.68. Simulation results confirm the efficiency of excise tax policy changes, having an evident decrease in consumption and increase of public revenues.ConclusionAnalysis of the tobacco market and regulatory environment suggests that the increase of excise and other taxes on tobacco have an important direct impact on the reduction of cigarettes and other tobacco products consumption. Our estimates of long and short-run price elasticity show that direct impact is strong and very much in accordance with the results obtained so far for other low-income and middle-income countries. This paper gives a contribution to the analysis of price elasticity of demand for cigarettes, which was for the first time conducted in Montenegro.

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