| Summary: | Background
There
is increasing body of evidence that tobacco excess tax is the most effective
policy for reducing cigarette smoking. The effectiveness of taxes, however, are
contingent on how the increase impact the retail price. As to whether the
burden of the tax increase is equitable, depends on the responsiveness of different
socioeconomic groups to price change. This paper provides an extensive analysis
of the price and income elasticity of demand for cigarette. Specifically, the
identify how individuals from different socioeconomic status response changes
in cigarette retail price.
Methods
A unique large sample of repeated cross-sectional data from South Africa
2008 - 2014 allows reduced-form cigarette demand equations to be estimated by
socioeconomic status, gender, race and age group. This data equally allows us
to control smoking addiction and other individual characteristics. We employ
the pooled ordinary least square and the random effect technique to estimate
the price and income elasticity of demand for cigarette.
Results
We
find a negative cigarette price and a positive income effect on smoking
intensity. The price effects are stronger for low income individuals, women,
Black Africans and young and old individuals. The income effects are higher for
high income individuals, men, whites, and older adults.
Conclusions
The findings highlight the importance of this policy space. Tobacco
price increases appear to reduce cigarette consumption more among the
vulnerable population and in part may be a policy tool for reducing inequality
health.
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