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Elasticity of cigarette smoking demand in the Philippines after the 2012 Sin Tax Reform Act

Preventive Medicine Mar 04, 2020

Cheng KJG, et al. - Given a drastic increase in cigarette prices after the 2012 Philippine tobacco excise tax reform took effect in 2013, researchers here examined whether the tax introduced was high enough to significantly decrease smoking prevalence. With excise tax as an instrumental variable, the total price elasticity of cigarette demand was investigated using regression analyses on the pooled Philippines 2009 and 2015 Global Adult Tobacco Survey data. Price variation observed following the reform took effect can be employed for the estimation of price elasticity of cigarette demand. Endogeneity of price was dealt with through the instrumental variable approach with the tax as the instrument. As per outcomes, they suggest cigarette demand as inelastic, given that total cigarette price elasticity of demand ranges from −0.56 to −1.10 which indicates that for every 10% price hike, total cigarette demand decreases by 5.6% to 11.0%. Furthermore, total price elasticities were provided in this work for different subpopulations.
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