Price and income elasticity of cigarette demand in Bosnia and Herzegovina by different socioeconomic groups (original) (raw)
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Price elasticity of demand for cigarettes in Bosnia and Herzegovina: microdata analysis
Tobacco Control, 2020
BackgroundBosnia and Herzegovina (B&H) is among the top 10 countries in the world in terms of number of smokers. The cigarette prices in B&H are under a direct impact of state excise tax policy. The specific excise on cigarettes was introduced in B&H in 2009. Since then it has been increasing every year thus being the main driver of cigarette prices growth.MethodsIn this paper we estimate price elasticity of demand for cigarettes following Deaton demand model and apply it on microdata obtained from the Household Budget Surveys in B&H conducted in 2011 and 2015. Deaton model uses within-cluster information to estimate total expenditure elasticities and then uses between-cluster information to estimate price elasticities. For B&H, the cluster is defined as a municipality × in the year t. Our sample contains 14 252 households, divided into 267 clusters.ResultsOur results show that the price elasticity is statistically significant and amounts to −1.366. This means that if cigarette pric...
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While previous research has indicated that increasing tobacco excises is a crucial instrument for lowering tobacco demand, this policy has been criticized for its alleged regressive impact on the poor. However, this critique does not take into account the behavioral response, i.e., decrease in consumption that occurs after excises and prices increase. In this paper, we examine the effect of cigarettes’ price increase on tobacco consumption, household expenditures, and tax burdens in three income groups and provide empirical arguments on the regressivity/progressivity effects of tobacco tax increase. Estimated elasticities indicate that all groups decrease their cigarettes demand with increasing prices, with demand decrease stronger for low- than for middle- and high-income households. Results further suggest that increasing tobacco excises (1) decreases tobacco expenditure of low-income households, which increases their productive consumption, such as on food, clothes, etc., and (2)...
Economic Analysis
Tobacco consumption continues to be behavior engaged in by a large percentage of Bosnia & Herzegovina (BiH) citizens. According to the official statistics, nearly half of the state’s adults, that is about 1,200,600 people, consume tobacco products on a daily bases. The state excise policy is one of the main available tools for reducing smoking prevalence because cigarette prices are under the direct impact of this policy. The specific excise on cigarettes introduced in BiH in 2009 and has increased every year so it was the main driver of cigarette price growth. In order to provide research-based evidence for more effective tobacco taxation policies in BIH, in this paper we estimate the price elasticity of demand for cigarettes using the macro-level data for the period 2008 to 2017, on a semi-annual basis. The results have shown that the increase in prices of cigarettes has a statistically significant impact on cigarette consumption, at a significance level of 1%. The estimated price...
Tobacco price elasticity in Bosnia: micro data analysis
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Smoking is an endemic problem in Bosnia & Herzegovina (BiH), and BiH is among the top 10 countries in the world for cigarettes consumption (World Atlas, 2018). The state excise policy is one of the main available tool for reducing smoking prevalence because the cigarette prices are under direct impact of this policy. The specific excise on cigarettes introduced in BiH in 2009 and have increased every year so it was the main driver of cigarettes price growth. In order to determine effect of increase in cigarette prices, and thus effect of excise policy on demand for cigarettes in BIH, in this paper we estimate price elasticity of demand for cigarettes. We follow Deaton (1988) demand model and apply it on micro data, obtained from the Household Budget Surveys in BiH in 2011 and 2015. Our results show that the price elasticity coefficient is statistically significant and amounts to -0.65. This means that if cigarette prices in BIH increase by 10%, the demand for cigarettes, among smoke...
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This paper usesthe Living Standards Measurement Study (LSMS) Household Survey, conducted in 1995, to analyze demand for cigarettes in Bulgaria and the effects on the poor of a hypothetical revenue-maximizing specific excise tax increase levied on cigarettes. One important finding is that the tax increase has a beneficial effect on the poor, in the sense that the tax burden on the low and lower-middle group is reduced.
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Besides having a destructive impact on smokers, cigarette consumption also creates a negative externality for passive smokers. Thus, the government implements cigarette excise to control cigarette consumption while increasing state revenue. This study aims to determine the effect of cigarette prices and income on cigarette consumption and the impact of excise tariffs on cigarette consumption and excise tax revenue. The data used are 33 provincial data in Indonesia from 2013 to 2018. The methods in this research are panel data regression using fixed-effect with GLS for model one and a random effect for model two. The results indicated that the cigarette price elasticity and income elasticity of demand were -0.317 and 0.635, respectively, showing that cigarette consumption is inelastic. In the simulation, an increase in excise tariffs by 10%, 25%, and 50%, respectively, led to a decrease in cigarette consumption by 1.55%, 3.86%, and 7.73%, and an increase in state revenue from excise ...
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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.
Tobacco Prevention and Cessation, 2019
This paper analysis the determinant factors of tobacco consumption in of Albania, which is one of the countries with highest smoking prevalence in Europe. To empirically estimate the elasticity of cigarettes demand in Albania, this paper uses the Living Standard Measurement Survey (LSMS) applying the Deaton's (1988) demand model. Our paper estimates an Almost Ideal Demand System (AIDS), which allows disentangling quality choice from exogenous price variations through the use of unit values from cigarette consumption. Following a three-stage procedure, the estimated results suggest that the price elasticity is around-0.57. The price elasticity appears to be within the range of estimated elasticities in developing countries and in line with the estimates elasticities from the model using aggregate data. In terms of the control variables, it seems that the total expenditure, household size, male to female ratio and adult ratio are important determinants of tobacco demand in Albania. Thus, since an increase in price, which have been mainly driven by the increases of taxes, have demonstrated to have had a significant impact on tobacco consumption, the government should further engage in gradual increase of taxation.
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The subject of this paper is the econometric analysis of tobacco demand in Serbia. The aim of this paper is to quantify the impact of income and socio-economic and demographic characteristics of households on tobacco expenditure based on microdata from the 2019 Household Budget Survey conducted by the Statistical Office of the Republic of Serbia according to the same methodology applied by the European Union Agency for Statistics. The influence of these factors was quantified on the basis of seven different functional forms of Engel curves, which are most often used in econometric empirical research. Based on the estimated parameters of the empirical specifications of Engel curves and the elasticity derived from them, the hypothesis of inelasticity of demand for tobacco products in relation to household income was tested. © 2020 EA. All rights reserved.
Tobacco control, 2014
In Bangladesh, the average excise tax on cigarettes accounted for just 38% of the average retail price of cigarettes in 2009, and 45% in 2010. Both these rates are well below the WHO recommended share of 70% of the retail price at a minimum. There is thus ample room for raising taxes on cigarettes in Bangladesh. The objective of the present work was therefore to estimate the price elasticity of demand for cigarettes and the effect of tax increases on the consumption of cigarettes and on tax revenue in Bangladesh. Based on data from Wave 1 (2009) and Wave 2 (2010) of the International Tobacco Control Bangladesh Survey, we estimated the overall impact of a price change on cigarette demand using a two-part model. The total price elasticity of cigarettes was measured by the sum of the elasticity of smoking prevalence and the elasticity of average daily consumption conditional on smoking participation. The price elasticity estimates were used in a simulation model to predict changes in c...