Global demand for cigarettes: a cross-country analysis of consumption, income, and price elasticity; 2008-2012

Abstract

Background: Tobacco taxation remains an effective but under-utilized means to reduce the burden of smoking-related diseases globally. Estimates of price elasticity of demand (PED, or price sensitivity) for cigarettes vary widely across countries and studies, and recent reports suggest that variations in the intensity of cigarette consumption influence price sensitivity. I sought to explore cross-country variations in PED accounting for variations in the relationship between smoking intensity, price, and income level. Methods: I obtained Global Burden of Disease 2013 estimates of per capita cigarette consumption in 181 countries over five years (2008 – 2012). I obtained data on average price per pack of cigarettes in each country-year. I included, as controls, per capita gross domestic product (GDP) as a proxy for income as well as data on other tobacco policies. I used quantile regression to model PED for cigarettes across varying levels of cigarette consumption, and I assessed statistical significance using robust standard errors. I visualized the results using simulation techniques and generated “predicted” elasticities for individual countries based on the model. Results: I estimated that the PED for cigarettes was -0.15 on average over 2008 – 2012, though it was smaller in low- and high-consumption settings. I found a synergistic negative impact of price and country income on demand. Hence low income countries were expected to be less price sensitive as the intensity of smoking increased, while high income countries were expected to be more price sensitive. The countries in the dataset with the weakest predicted PED were predominantly in sub-Saharan Africa, where smoking intensity low-to-moderate as compared with other regions. My results were robust to the exclusion of an interaction between price and income, and the model produced similar results when applied to individual years within the dataset. Conclusions: Globally, there is significant heterogeneity in PED for cigarettes. Countries where the intensity of smoking is very high or low are less price-sensitive than moderate-consumption countries. Furthermore, wealthier countries are more price-sensitive than poorer countries. These findings raise concerns about the relative effectiveness of raising cigarette prices in lower income settings in the absence of robust non-tax tobacco policies.