Abstract
This paper investigates the impact of cigarette prices on adults’ smoking and smokeless tobacco (SLT) use initiation and cessation decisions in India from 1980 to 2017. We use individual-level data from the 2017 Global Adult Tobacco Survey (GATS) to recreate the smoking history of current or past adult tobacco users using self-reported data on the years of tobacco use, initiation, and cessation merged with historical data on cigarettes, bidis, and SLT product prices. To estimate the effect of price changes on smoking and SLT use transitions, we use a pooled linear model and propensity score matching (PSM) to construct an artificial treatment group where weights capture the likelihood of being an ever-smoker. We find that price increases are a statistically significant deterrent to smoking initiation, with price elasticity of initiation being on average -0.0236 (CI: -0.024 -0.023) and -0.000428 (0.0 – 0.0) for smoking and SLT, respectively. This implies, for example, that a 10% increase in prices results in a 0.24% smaller smoking initiation and 0.004% smaller SLT use initiation. We find that prices can also encourage quitting, but the effects are not always significant, with elasticities of 0.0218 (CI: 0.017 0.026) and 0.0026 (CI: 0.001 0.004) for smoking and SLT, respectively. This implies that a 10% increase in prices will result in a 0.22% increase in the probability of quitting smoking and a 0.03% increase in the probability of quitting SLT use. The elasticity varied by income group, gender, and between young and all adults, with larger effects among lower-income adults and especially among young females. Higher cigarette prices that can be achieved by tobacco tax increases can significantly reduce initiation and encourage cessation, thus improving public health, especially among the most vulnerable population subgroups.
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Notes
Filmer and Pritchett (2001) note that asset-based measures describe an individual or a household’s long-run economic status and therefore do not necessarily reflect short-term fluctuations in economic well-being or economic shocks. Thus, although we expect the income variable to be correlated with the wealth measure estimated here, we are aware that the two might tap different dimensions of economic well-being.
Chi-squared tests between regressions using SUR (seemingly unrelated regressions) reveal that differences between price elasticity coefficients for low-income vs. middle-income, low-income vs. high-income and middle-income with high-income were not statistically significant for both smoking and smokeless regression as shown in Table 5.
In India, tax on smokeless products is applied as ad valorem (a percentage of retail price), whereas for both cigarettes and bidis, the taxation has both an ad valorem tax and a specific component applied per stick. More details on taxation of tobacco products before the introduction of Goods and Services taxation in 2017 and after it are available elsewhere (John et al., 2010, 2019).
In comparison, the full-price elasticity of demand of SLT use in India, including changes in the extensive margin (changes in the prevalence of SLT use) and at the intensive margin (changes in the intensity of use for each user), has been found to range between -0.5 to -1 (John, 2008; Selvaraj et al., 2015).
These regressions are available upon request.
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This study was fully funded by the Campaign for Tobacco-free Kids.
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Dauchy, E.P., John, R.M. The Effect of Price and Tax Policies on the Decision to Smoke or Use Smokeless Tobacco in India. Prev Sci 23, 1101–1114 (2022). https://doi.org/10.1007/s11121-022-01360-w
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DOI: https://doi.org/10.1007/s11121-022-01360-w