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THE IMPACT OF TOBACCO PRICES ON SMOKING IN INDIA

Wednesday, 23rd of November 2011

 

‘Findings from this study provide additional evidence of the effectiveness of tobacco prices at reducing tobacco use.’

• SOCIOECONOMIC DIFFERENCES IN THE IMPACT OF SMOKING TOBACCO AND ALCOHOL PRICES ON SMOKING IN INDIA

 

by G. Emmanuel Guindon, Arindam Nandi, Frank J. Chaloupka, IV, Prabhat Jha  -  #17580 (HE)

 

Also at http://papers.nber.org/papers/W17580

 

Abstract:

 

The threat posed by smoking to health in India is severe.  Already 1

in 5 of all adult male deaths and 1 in 20 of all adult female deaths

at ages 30-69 are due to smoking and India will soon have 1 million

smoking deaths a year.     Increasing tobacco prices has been found to

be the single most effective method to reduce smoking.     Yet, bidis,

the most common form of smoked tobacco in India, are largely untaxed,

while cigarettes are taxed at about 40% of retail price, well below

the 65-80% rate noted by the World Bank in countries with effective

tobacco control policies.  Moreover, low and stagnant tax rates have

occurred in a period in which all tobacco products have become more

affordable with income growth.  First, we use data from the most

recent three consecutive quinquennial National Sample Survey (NSS)

rounds (NSS 50, 55 and 61 conducted in 1993/94, 1999/00 and 200/05)

and a two-equation system of budget shares and unit values that

attempts to correct for quality and measurement error.     Second, we

pool data from the most recent nine rounds of NSS (NSS 55-57, 59-64,

conducted between 1999/00 to 2007/08).     Our analyses of single and

repeated cross-sections yield own-price elasticity for bidis that are

roughly in keeping with existing evidence.  We find that a 10%

increase in bidi prices would reduce the demand for bidis by about 6

to 9.5%.  We find, however, that own-price elasticity for cigarettes

in India is substantially larger than previously thought.  Our

estimates suggest that cigarette users are at least as responsive as

bidi users to price changes.  On the whole, our analyses suggest that

low SES households are likely more responsive to price changes than

high SES households.  Our analyses also uncovers important and

policy-relevant cross-prices effects.  Findings from this study

provide additional evidence of the effectiveness of tobacco prices at

reducing tobacco use.

 

http://papers.nber.org/papers/W17580