A duration analysis of the role of cigarette prices on smoking initiation and cessation in developing countries
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- Kostova, D., Chaloupka, F.J. & Shang, C. Eur J Health Econ (2015) 16: 279. doi:10.1007/s10198-014-0573-9
This study evaluates the impact of cigarette prices on smoking initiation and cessation among adults in two pooled samples of 6 low- to lower-middle income countries (LMICs) and 8 upper-middle income countries (UMICs). We find that, while higher prices reduce smoking across the board, this reduction occurs through different behavioral mechanisms in lower versus higher income countries. Specifically, cigarette prices reduce smoking rates by deterring initiation in LMICs while in UMICs they act primarily by promoting cessation. Because current smoking rates are relatively lower in LMICs and relatively higher in UMICs, this differential mechanism underscores the adaptability of tobacco prices as a tool for regulating tobacco use across countries at different levels of development; it shows that prices can be used to sustain the relatively low rates of smoking in LMICs by preventing entry of new smokers, and can reduce the relatively high rates of smoking in UMICs by encouraging exit of existing smokers. Using split-population duration models and controlling for fixed and time-varying unobserved country characteristics, we estimate that the price elasticity of initiation in LMICs is −0.74 and the price elasticity of cessation in UMICs is 0.51.