Tobacconomics Launches a Second Tobacco Control Supplement

September 13, 2022

Tobacconomics is excited to announce the launch of our second Tobacco Control supplement: The Economics of Tobacco Taxation in Low- and Middle-Income Countries (Part 2). This supplement includes original research from our think tank partners in Asia, Latin America, and Southeastern Europe.

We began this project in 2017 with the goal of building a local evidence base on the economics of tobacco and tobacco taxation in low- and middle-income countries. Through capacity-building and collaboration with local think tanks and institutions, we have been working diligently with our partners to fill this evidence gap as the necessary first step for policy change. Over the past five years, we have released 173 reports, policy briefs, working papers, and other policy research products with our think tank partners. Each of these products addresses at least one of six core research competencies, which we developed based on the common topics of debate surrounding tobacco taxation to ensure that our research is relevant and timely for policy makers.

Early in the project, we quickly realized that delivering impactful research requires more than a careful selection of research questions and high-quality analysis. To have the maximum impact, the research must be translated and disseminated within a network of stakeholders with the ability to use it for policy change. This gap prompted us to create a framework of an additional six core competencies for our research partners focused specifically on policy impact, drawing from existing literature on the key criteria needed for research to effectively inform policy.

Core Competencies of Policy Impact	Description
Research translation	Demonstrated ability to produce clear and accessible policy reports, briefs, key messages, and concrete policy recommendations
Strategic dissemination	Demonstrated ability to disseminate the research strategically with consideration of the budgetary cycle and/or political timing, effective outreach, and adaptability to remote (that is, not in-person) outreach
Coalition building	Demonstrated ability to develop supportive relationships with key stakeholders from civil society
Relationships with policy makers	Demonstrated ability to develop supportive relationships with key policy makers
Trusted resource status	Demonstrated ability to produce rapid response technical assistance upon request from policy makers and other stakeholders
Sustainability	Demonstrated interest and motivation to inform policy in the long term

Following this model, our think tank partners have strengthened their capacity to effectively translate and disseminate their findings through stakeholder networks. In fact, research produced under this project has already informed the successful adoption of more effective fiscal policies in 11 countries around the world.

We discuss more about this policy impact goal for our research and the whole project in the overview article of the supplement, “Achieving policy impact on tobacco economics research: experiences and lessons learnt.” The remainder of the supplement is dedicated to highlighting the impressive work from our think tank partners. The studies cover a variety of topics including:

Consumer responses to cigarette price increases

1. Effects of the Brazilian tax reform plans on the tobacco market

This study simulates the impact of a proposed tax reform that would introduce a new goods and services tax and tobacco excise tax, under three scenarios. The researchers find that this reform would increase tobacco tax revenue by 8.5%, or 1.5 billion BRL per year.

2. Brand-switching and tobacco taxation in Vietnam

This study examines cigarette brand substitution patterns and the impact of a proposed tax reform on smokers. The results show that when smokers are faced with a price increase, they are more likely to substitute a domestic brand with another domestic brand or opt out of the included brands  (many of those “opting out” quit smoking), rather than choose a more expensive foreign brand.

3. How do prices of manufactured cigarettes and roll-your-own tobacco affect demand for these products? Tobacco price elasticity in Western Balkan countries

This study analyzes the own-price and cross-price elasticities of manufactured cigarettes (MC) and roll-your-own (RYO) tobacco in six countries in Southeastern Europe. The findings demonstrate that higher prices of each are associated with lower prevalence, but RYO tobacco is used as a cheaper substitute for MC.

Distributional impacts of cigarette price increases

4. Differential price responses for tobacco consumption: implications for tax incidence

This study estimates the price elasticity of demand for cigarettes by income and age group. The results indicate that the lower-income and younger populations are more responsive to price, meaning they would reduce consumption more when faced with a price increase. 

5. Price and income elasticity of cigarette demand in Bosnia and Herzegovina by different socioeconomic groups

This study assesses the impact of cigarette price increases on demand by income group. The research shows that a cigarette price increase would reduce consumption among low-income households the most and reduce their tax burden, while the overall government cigarette tax revenue would increase.

6. Extended cost–benefit analysis of tobacco taxation in Brazil

This study presents a cost-benefit analysis of a cigarette tax increase by income and age group. The findings suggest that low-income and/or younger smokers would benefit the most in the long-term due to a reduction in medical expenses and increased productivity.

7. Effectiveness of tax policy changes in Montenegro: smoking behaviour by socio-economic status

This study simulates the impacts of a significant increase to the specific excise tax and finds that smoking prevalence and consumption are very responsive to price and income changes, with considerable differences in elasticities between income groups. Low-income and middle-income households would benefit the most, while the highest tax revenue collection is generated from the wealthiest group.

8. Impoverishing effect of tobacco use in Vietnam

This study estimates the impact of tobacco use and tobacco-related medical expenses on poverty and inequality. The results demonstrate that tobacco use increased the number of people living in poverty and increased the poverty gap.

9. Income and cigarette price responsiveness: evidence from Vietnam

This study examines the role of income in the sensitivity of consumers to the price of tobacco. The researchers conclude that low-income smokers are more responsive to price, although large variation in cigarette prices may mask this effect and weaken the effectiveness of tax increases.

Tax leakages along the supply chain

10. Tobacco tax evasion in Western Balkan countries: tax evasion prevalence and evasion determinants

This study focuses on tobacco tax evasion and the illicit cigarette market in six Southeastern Europe countries. The findings determine that weaker tax administration is associated with more illicit trade, while higher tobacco taxes and prices do not increase the size of this market.

11. Regional implications of the tobacco value chain in Paraguay

This study analyzes the supply and production of tobacco relative to consumption. The estimates show that there is an oversupply of cigarettes, which suggests that cigarettes are exported illegally to neighboring countries, a finding consistent with research from these countries.

Economic costs of tobacco use

12. The 2019 economic cost of smoking-attributable diseases in Indonesia

This study calculates the total economic cost of tobacco use. The researchers find that tobacco use is a burden on the health care system and the economy, and the revenue from tobacco taxes is not sufficient to cover these costs.

Macroeconomic impacts of tobacco taxation

13. Tobacco industry in Mexico: a general equilibrium analysis

This study assesses the impact of tobacco taxes on employment. The results suggest that increasing tobacco taxes would create additional jobs in other sectors, resulting in a net gain for the economy.

 

We hope that the research by our think tank partners continues to inform more effective tobacco taxation in low- and middle-income countries to reduce consumption while raising additional revenue for governments. The broader findings from our research across countries and regions are very consistent, suggesting that this body of evidence is applicable far beyond the specific countries here. If you want to learn more about Tobacconomics, the Think Tanks Project, and some of the valuable research produced by our partners thus far, be sure to check out our new Supplement!