Price and expenditure elasticity of cigarette demand in El Salvador: a household-level analysis and simulation of a tax increase

2020 ◽  
pp. tobaccocontrol-2019-055568
Author(s):  
Guillermo Paraje ◽  
Daniel Araya ◽  
Adonay De Paz ◽  
Nigar Nargis
Keyword(s):  
El Salvador ◽  
Total Population ◽  
Tobacco Consumption ◽  
Cigarette Consumption ◽  
Tax Revenue ◽  
Middle Income ◽  
Household Level ◽  
Price Increases ◽  
Tobacco Tax ◽  
Expenditure Elasticity

BackgroundIn El Salvador, 8.8% of adults 15 years and older smoke cigarettes. Little is known about the sensitivity of cigarette consumption among the adults in El Salvador to tax and price increases and income growth.MethodsElasticities are estimated using Deaton’s Almost Ideal Demand System model applied to data from the National Household Income and Expenditure Survey 2005/2006 for the total population and separately for income groups. The estimates are then used to simulate the effects of a proposed change in tobacco tax policy on cigarette consumption and tax revenue.FindingsThe estimated price elasticities (−0.77 for the total population) are within the range of price elasticity estimates available for low and middle-income countries. Given the estimated elasticities, a tobacco tax increase is expected to reduce the number of smokers (by almost 20%) and increase tobacco tax revenue (by more than 50%).ConclusionsIncreasing tobacco taxes has the potential to decrease consumption in El Salvador and raise fiscal revenues. The tobacco tax burden in El Salvador is one of the lowest in Latin America and the social costs of tobacco consumption largely exceed the tobacco tax revenues. An increase in tobacco tax could significantly decrease the number of smokers and reduce the burden of tobacco-related diseases and deaths.

scholarly journals Price, Income, and Affordability as the Determinants of Tobacco Consumption: A Practitioner’s Guide to Tobacco Taxation

2020 ◽  
Author(s):  
Nigar Nargis ◽  
Michal Stoklosa ◽  
Ce Shang ◽  
Jeffrey Drope
Keyword(s):  
Price Elasticity ◽  
Tobacco Consumption ◽  
High Income ◽  
Cigarette Consumption ◽  
Tobacco Products ◽  
Middle Income ◽  
Middle Income Countries ◽  
Price Increases ◽  
Tobacco Tax ◽  
Tobacco Taxation

Abstract Introduction Tobacco product prices and consumers’ income are the two major economic determinants of tobacco demand. The affordability of tobacco products is dependent on the price of tobacco products relative to consumer income. Increase in tobacco tax is expected to lead to higher price, lower affordability, and reduced consumption. Price elasticity and affordability elasticity are used in analyzing the effect of tobacco tax increases on tobacco consumption and public health. The availability of both parameters raises the question of which one to apply in policy discussions. Aims and Methods Using global data on cigarette consumption, price, income, and tobacco control measures for 169 countries over 2007–2016, this study estimated the price elasticity and affordability elasticity of cigarette consumption by country income classification using country-specific fixed effects model for panel data. Results The estimates show that the restriction of equal strength of the effects of price and income changes on tobacco consumption maintained in affordability elasticity estimation is valid for low- and middle-income countries, while it is rejected for high-income countries. Conclusions Affordability elasticity may prove to be a useful parameter to explain and predict the sensitivity of consumers to tobacco tax and price policy changes under conditions of robust economic growth, which are more likely to be observed in countries with initial low- or middle-income setting. It can provide a reasonable benchmark for tobacco tax and price increase necessary to effectively reduce affordability and consumption of tobacco, which can form a basis for building systematic tax and price increases into the tobacco tax policy mechanism. Implications Price elasticity measures the sensitivity of consumers to changes in real prices, holding real income constant. Affordability elasticity measures the sensitivity of consumers to price changes adjusted for inflation and income changes. Existing scientific literature on tobacco demand abounds in both price and affordability elasticity estimates, without providing a clear explanation of the theoretical and policy implications of using one parameter over the other. By estimating and comparing price and affordability elasticities for high-income and low-and-middle-income countries separately, this article offers a guide to the practitioners in tobacco taxation for evaluating the effectiveness of tax-induced price increases on tobacco consumption.

scholarly journals An Intertemporal Analysis of Post-FCTC Era Household Tobacco Consumption in Pakistan

2019 ◽  
Vol 16 (14) ◽  
pp. 2532
Author(s):  
Biplab Kumar Datta ◽  
Muhammad Jami Husain ◽  
Nigar Nargis
Keyword(s):  
Tobacco Control ◽  
Tobacco Use ◽  
Smokeless Tobacco ◽  
National Level ◽  
Tobacco Consumption ◽  
Smoking Rate ◽  
Middle Income ◽  
Household Level ◽  
The Poor ◽  
Smokeless Tobacco Use

Since the ratification of the WHO Framework Convention on Tobacco Control (FCTC) in 2004, Pakistan has taken various measures of tobacco control. This study examines how these tobacco control measures are associated with change in household-level tobacco consumption patterns in Pakistan over the decade (2005 to 2016) after FCTC ratification. We used multiple waves of the household survey data of Pakistan from 2004–2005 to 2015–2016 for analyzing household-level tobacco use. We find that tobacco consumption remains at a significantly high level (45.5%) in Pakistan despite the recent declining trend in the post-FCTC era. During the preparatory phase of FCTC implementation between 2005 and 2008, the smoking rate was on the rise, and smokeless tobacco use was declining. Over the implementation phase of FCTC policies between 2008 and 2016, the pattern of change in tobacco use reversed—the smoking rate started to decrease while smokeless tobacco use started to rise. However, the decrease in the smoking rate was slower and the increase in smokeless tobacco use at the national level was driven by an increase among the poor and middle-income households. These trends resulted in the growing burden of tobacco expenditure among the poor and middle-income households relative to the wealthier households.

scholarly journals Relationship between smoking and health and education spending in Chile

2017 ◽  
Vol 27 (5) ◽  
pp. 560-567 ◽  
Author(s):  
Guillermo Paraje ◽  
Daniel Araya
Keyword(s):  
Total Population ◽  
Equation System ◽  
Tobacco Consumption ◽  
Seemingly Unrelated Regression ◽  
Alcoholic Beverages ◽  
Statistical Relationship ◽  
Budget Share ◽  
Household Level ◽  
Goods And Services ◽  
Nationally Representative

ObjectiveTo estimate the degree to which tobacco consumption is associated with spending on a set of goods and services in Chile, especially health and education, for the total population as well as for specific subgroups.MethodsA seemingly unrelated regression equation system was used to estimate the statistical relationship between having tobacco expenditures and the budget share allocated to other items for the total population and for specific subgroups in Chile (eg, households within the bottom/top 33% by total expenditures). The use of household-level data allows for the control of a number of sociodemographic characteristics. The nationally representative 2012 Chilean Household Expenditure Survey was used for the analysis.ResultsTobacco consumption is associated with lower budget shares allocated to healthcare, education and housing expenses, especially for poorer households. In the case of health, not consuming tobacco is related to higher health expenditures: up to 32% for the total population. Similarly, in the case of education, not consuming tobacco is statistically related to higher education expenditures: up to 16% for the total population. For all groups, tobacco consumption is also related to a significantly higher budget share allocated to alcoholic beverages.ConclusionsThe strong significant statistical relationship found between tobacco consumption and resources allocated to healthcare and education consumption may be indicative of the existence of a crowding out effect of tobacco. This effect, in turn, may increase the burden that the rest of society must bear for the increased healthcare that they require because of tobacco consumption.

The effect of cigarette price increases on cigarette consumption, tax revenue, and smoking-related death in Africa from 1999 to 2013

2017 ◽  
Vol 62 (8) ◽  
pp. 899-909 ◽  
Author(s):  
Li-Ming Ho ◽  
Christian Schafferer ◽  
Jie-Min Lee ◽  
Chun-Yuan Yeh ◽  
Chi-Jung Hsieh
Keyword(s):  
Cigarette Consumption ◽  
Tax Revenue ◽  
Cigarette Price ◽  
Consumption Tax ◽  
Price Increases

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 Tobacco price increase and consumption behaviour among male smokers in Saudi Arabia: a community-based study

2020 ◽  
Vol 26 (12) ◽  
pp. 1518-1524
Author(s):  
Mohamad Al Tannir ◽  
Amani Abu Shaheen ◽  
Youssef Altannir ◽  
Mustafa Altannir
Keyword(s):  
Saudi Arabia ◽  
Purchasing Power Parity ◽  
Tobacco Consumption ◽  
Cigarette Consumption ◽  
Power Parity ◽  
Community Based ◽  
Elasticity Of Demand ◽  
Quit Smoking ◽  
Consumption Behaviour ◽  
Tobacco Tax

Background: Saudi Arabia doubled its tobacco tax in June 2017. Aims: To examine the association between an increase in tobacco prices and consumption behaviour among current male smokers in Riyadh. Methods: We conducted a community-based study using a self-administered questionnaire distributed to current male smokers aged 15+ years in Riyadh in 2018. The survey included questions on sociodemographic characteristics, tobacco consumption and self-reported chronic health conditions. Results: A total of 1481 participants were included in the final data analysis. After the tobacco tax was doubled, 25.6% of the participants reduced their cigarette consumption and 1.0% quit smoking. The average daily cigarette consumption after enforcing the tobacco tax [19.77, standard deviation (SD) 10.7], was statistically significantly lower than before taxation (21.19, SD 10.8) (P < 0.0001). The calculated price elasticity of demand was −0.20 (inelastic). Employment status (P = 0.002) and per capita gross domestic product purchasing power parity (P = 0.001) were the only statistically significant factors associated with the change in smoking habits. Conclusions: Increasing tobacco prices reduced tobacco consumption by 26.6% among Saudi Arabian male smokers

scholarly journals Analysis of Tobacco Price Elasticity in Albania Using Household Level Data

2020 ◽  
Vol 17 (2) ◽  
pp. 432 ◽  
Author(s):  
Aida Gjika ◽  
Edvin Zhllima ◽  
Klodjan Rama ◽  
Drini Imami
Keyword(s):  
Price Elasticity ◽  
Tobacco Consumption ◽  
Living Standard ◽  
Demand Model ◽  
Middle Income ◽  
Female Ratio ◽  
Household Level ◽  
Middle Income Countries ◽  
Level Data ◽  
Quality Choice

This paper analyzes the determinant factors of tobacco consumption in Albania, which is one of the countries with the highest smoking prevalence in Europe. To empirically estimate the elasticity of cigarettes demand in Albania, the paper uses the Living Standard Measurement Survey (LSMS) applying Deaton’s (1988) demand model. This paper estimates an Almost Ideal Demand System (AIDS), which allows disentangling quality choice from exogenous price variations using unit values from cigarette consumption. Following Deaton’s model, the results suggest that the demand for tobacco is inelastic, with a price elasticity of −0.57. The price elasticity appears to be within the range of elasticity estimates frequently reported for low- and middle-income countries. The results suggest that total expenditure, household size, male-to-female ratio, and adult ratio are important determinants of tobacco demand in Albania. The increase in the tobacco price, which has been mainly driven by increased excises, has demonstrated a significant impact on reducing tobacco consumption. Consequently, the Albanian government may engage in gradual increases in excise taxes given the inelastic tobacco demand.

scholarly journals Illicit tobacco trade in Georgia: prevalence and perceptions

2019 ◽  
Vol 29 (Suppl 4) ◽  
pp. s227-s233 ◽  
Author(s):  
Megan Little ◽  
Hana Ross ◽  
George Bakhturidze ◽  
Iago Kachkachishvili
Keyword(s):  
Low Income ◽  
Household Survey ◽  
Tobacco Consumption ◽  
Middle Income ◽  
Middle Income Countries ◽  
Tobacco Taxes ◽  
Tobacco Tax ◽  
Illicit Tobacco Trade ◽  
Multistage Sampling ◽  
Cigarette Packs

BackgroundIn lower-income and middle-income countries, limited research exists on illicit tobacco trade and its responsiveness to taxation. Tobacco taxes are critical in reducing tobacco consumption, thereby improving public health. However, the tobacco industry claims that tax increases will increase illicit tobacco trade. Therefore, research evidence on the size of the illicit cigarette market is needed in Georgia and other low-income and middle-income countries to inform tobacco tax policies.MethodsIn 2017, a household survey using stratified multistage sampling was conducted in Georgia with 2997 smokers, to assess illicit tobacco consumption. Smokers were asked to show available cigarette packs to the surveyors. These were examined for tax stamps and health warnings which allowed for an assessment of illegal cigarette consumption in Georgia.FindingsThe packs shown to surveyors suggest illicit cigarette trade is low (1.5%), although with regional differences, as illicit cigarette packs were present in 6% of the households in Zugdidi. Most illicit cigarettes were purchased at kiosks or informal outlets. This estimate might be conservative, as 28% of respondents did not show any packs to the surveyors.ConclusionsDespite recent tobacco tax increases, illicit cigarette trade in Georgia seems to be negligible. The market is more vulnerable to illicit cigarette trade close to the border with Abkhazia (near Zugdidi). Tighter control or ban of tobacco sales at kiosks and informal outlets may reduce illicit cigarette trade. Further investigation is planned to better understand why a large proportion of survey participants said they had no pack available at home.

scholarly journals The Political Economy of Tobacco in Mozambique and Zimbabwe: A Triangulation Mixed Methods Protocol

2020 ◽  
Vol 17 (12) ◽  
pp. 4262 ◽  
Author(s):  
Raphael Lencucha ◽  
Jeffrey Drope ◽  
Ronald Labonte ◽  
Benedito Cunguara ◽  
Arne Ruckert ◽  
...  
Keyword(s):  
Political Economy ◽  
Focus Group ◽  
Tobacco Control ◽  
Smallholder Farmers ◽  
Tobacco Consumption ◽  
The Political ◽  
Middle Income ◽  
Household Level ◽  
Country Level ◽  
Tobacco Production

Changing global markets have generated a dramatic shift in tobacco consumption from high-income countries (HICs) to low- and middle-income countries (LMICs); by 2030, more than 80% of the disease burden from tobacco use will fall on LMICs. Propelling this shift, opponents of tobacco control have successfully asserted that tobacco is essential to the economic livelihoods of smallholder tobacco farmers and the economy of tobacco-growing countries. This nexus of economic, agricultural and public health policymaking is one of the greatest challenges facing tobacco control efforts, especially in LMICs. To date, there is a lack of comparative, individual level evidence about the actual livelihoods of tobacco-growing farmers and the political economic context driving tobacco production. This comparative evidence is critically important to identify similarities and differences across contexts and to provide local evidence to inform policies and institutional engagement. Our proposed four-year project will examine the economic situation of smallholder farmers in two major tobacco-growing LMICs—Mozambique and Zimbabwe—and the political economy shaping farmers’ livelihoods and tobacco control efforts. We will collect and analyze the existing data and policy literature on the political economy of tobacco in these two countries. We will also implement household-level economic surveys of nationally representative samples of farmers. The surveys will be complimented with focus group discussions with farmers across the major tobacco-growing regions. Finally, we will interview key informants in these countries in order to illuminate the policy context in which tobacco production is perpetuated. The team will develop country-level reports and policy briefs that will inform two sets of dissemination workshops in each country with relevant stakeholders. We will also conduct workshops to present our findings to the survey and focus group participants, and other members of these tobacco-growing communities, so they can directly benefit from the research to which they are contributing.

scholarly journals Modelling the expected impact of cigarette tax and price increases under Vietnam’s excise tax law 2015–2020

2020 ◽  
pp. tobaccocontrol-2020-055920
Author(s):  
Mark Goodchild ◽  
Le Thi Thu ◽  
Dao The Son ◽  
Lam Nguyen Tuan ◽  
Robert Totanes ◽  
...  
Keyword(s):  
Tobacco Control ◽  
Predictive Modelling ◽  
Cigarette Consumption ◽  
Tax Law ◽  
Excise Tax ◽  
Tax Revenues ◽  
Price Increases ◽  
Cigarette Tax ◽  
Tobacco Tax ◽  
The Government

BackgroundVietnam’s national tobacco control strategy aims to reduce the rate of smoking among male adults from 45% in 2015 to 39% by 2020. The aim of this paper is to assess what contribution cigarette tax increases under Vietnam’s current excise tax plan can be expected to make to this target, and to discuss what additional measures might be implemented accordingly.MethodsThis study uses a mix of administrative datasets and predictive modelling techniques to assess the expected impact of tax and price increases on cigarette consumption, tobacco tax revenues and the rate of smoking between 2015 and 2020.FindingsThe average retail price of cigarettes is estimated to have increased by 16% (sensitivity analysis: 14%–18%) in inflation-adjusted terms between 2015 and 2020, while cigarette consumption is projected to decrease by 5.1% (4.5%–5.5%). The rate of smoking among males is projected to decrease to 42.8% (42.1%–43.6%) compared with the target of 39%. Total tax revenues from cigarettes are projected to increase by 21% (19%–23%), reflecting an extra ₫3300 billion in inflation-adjusted revenues for the government.ConclusionThe current excise tax law is expected to have only a modest impact on the rate of smoking in Vietnam, though it has generated tax revenues. If Vietnam is to achieve its tobacco control targets, the government should implement a mixed excise system with a high-specific component to promote public health by raising the price of cigarettes more significantly.

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