Quantity, quality, and regional price variation of cigarettes: Demand analysis based on a household survey in China
AbstractThis paper investigates the price elasticity of cigarettes using an urban household survey in China. We find that cigarette price is an important determinant of smoking. In our two-part model, the overall price elasticity is -Â 0.82. Nevertheless, tobacco demand is influenced by both price and quality. We net out the quality effect of tobacco demand to obtain standard price elasticities, which are between -Â 0.70 and -Â 0.35. In addition, when we estimate two demand systems of Chinese households, the estimated own-price elasticities of cigarettes are -Â 0.57 and -Â 0.81. These elasticities suggest that if the tobacco excise tax rate goes up, cigarette consumption will drop rapidly, and government revenue from the tobacco tax will increase.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal China Economic Review.
Volume (Year): 22 (2011)
Issue (Month): 2 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/chieco
Cigarette consumption Unit value Deaton model Demand system Tobacco taxation;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tansel, A., 1992. "Cigarette Demand, Health Scares and Education in Turkey," Papers 660, Yale - Economic Growth Center.
- Escario, Jose Julian & Molina, Jose Alberto, 2004. "Modeling the optimal fiscal policy on tobacco consumption," Journal of Policy Modeling, Elsevier, vol. 26(1), pages 81-93, January.
- Sayginsoy, Ozgen & Yurekli, Ayda A. & de Beyer, Joy, 2002. "Cigarette Demand, Taxation, and the Poor: A Case Study of Bulgaria," University of California at San Francisco, Center for Tobacco Control Research and Education qt35g997q4, Center for Tobacco Control Research and Education, UC San Francisco.
- Deaton, A., 1988.
"Price Elasticities From Survey Data: Extensions And Indonesian Results,"
138, Princeton, Woodrow Wilson School - Development Studies.
- Deaton, Angus, 1990. "Price elasticities from survey data : Extensions and Indonesian results," Journal of Econometrics, Elsevier, vol. 44(3), pages 281-309, June.
- Deaton, A., 1990. "Price Elasticities From Surveys Data: Extensions And Indonesian Results," Papers 69, World Bank - Living Standards Measurement.
- Chalfant, James A, 1987. "A Globally Flexible, Almost Ideal Demand System," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 233-42, April.
- Becker, Gary S & Murphy, Kevin M, 1988.
"A Theory of Rational Addiction,"
Journal of Political Economy,
University of Chicago Press, vol. 96(4), pages 675-700, August.
- Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
- Rijo M. John, 2005.
"Price elasticity estimates for tobacco and other addictive goods in India,"
Indira Gandhi Institute of Development Research, Mumbai Working Papers
2005-003, Indira Gandhi Institute of Development Research, Mumbai, India.
- Rijo M John, 2005. "Price Elasticity Estimates for Tobacco and Other Addictive Goods in India," Microeconomics Working Papers 22395, East Asian Bureau of Economic Research.
- Rijo John, 2005. "Price Elasticity Estimates for Tobacco and Other Addictive Goods in India," Working Papers id:117, eSocialSciences.
- Yen, Steven T. & Fang, Cheng & Su, Shew-Jiuan, 2004. "Household food demand in urban China: a censored system approach," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 564-585, September.
- Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-44, September.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, December.
- Preston, Ian & Laisney, François & Crawford, Ian A., 2002.
"Estimation of Household Demand Systems with Theoretically Compatible Engel Curves and Unit Value Specifications,"
ZEW Discussion Papers
97-06 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Crawford, Ian & Laisney, Francois & Preston, Ian, 2003. "Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications," Journal of Econometrics, Elsevier, vol. 114(2), pages 221-241, June.
- Ian Crawford & François Laisney & Ian Preston, 2002. "Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications," IFS Working Papers W02/17, Institute for Fiscal Studies.
- Ravallion, Martin & Shaohua Chen, 1996.
"What can new survey data tell us about recent changes in distribution and poverty?,"
Policy Research Working Paper Series
1694, The World Bank.
- Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," World Bank Economic Review, World Bank Group, vol. 11(2), pages 357-82, May.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
- Frank J. Chaloupka & Kenneth E. Warner, 1999.
"The Economics of Smoking,"
NBER Working Papers
7047, National Bureau of Economic Research, Inc.
- Lance, Peter M. & Akin, John S. & Dow, William H. & Loh, Chung-Ping, 2004. "Is cigarette smoking in poorer nations highly sensitive to price?: Evidence from Russia and China," Journal of Health Economics, Elsevier, vol. 23(1), pages 173-189, January.
- Marcos Chamon & Eswar Prasad, 2008.
"Why are Saving Rates of Urban Households in China Rising?,"
NBER Working Papers
14546, National Bureau of Economic Research, Inc.
- Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
- Marcos Chamon & Eswar Prasad, 2008. "Why are Saving Rates of Urban Households in China Rising?," IMF Working Papers 08/145, International Monetary Fund.
- Chamon, Marcos & Prasad, Eswar, 2007. "Why Are Saving Rates of Urban Households in China Rising?," IZA Discussion Papers 3191, Institute for the Study of Labor (IZA).
- Deaton, Angus, 1988.
"Quality, Quantity, and Spatial Variation of Price,"
American Economic Review,
American Economic Association, vol. 78(3), pages 418-30, June.
- Yoko Niimi, 2005. "An Analysis of Household Responses to Price Shocks in Vietnam: Can Unit Values Substitute for Market Prices?," PRUS Working Papers 30, Poverty Research Unit at Sussex, University of Sussex.
- Pogue, Thomas F & Sgontz, Larry G, 1989. "Taxing to Control Social Costs: The Case of Alcohol," American Economic Review, American Economic Association, vol. 79(1), pages 235-43, March.
- BISHOP, John A. & Liu, Haiyong & Meng, Qi, 2007. "Are Chinese smokers sensitive to price?," China Economic Review, Elsevier, vol. 18(2), pages 113-121.
- Deaton, Angus, 1986. "Demand analysis," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 30, pages 1767-1839 Elsevier.
- Nicita, Alessandro, 2004. "Efficiency and equity of a marginal tax reform - income, quality, and price elasticities for Mexico," Policy Research Working Paper Series 3266, The World Bank.
- Kazuki Kamimura, 2012. "Effectiveness of cigarette tax in Japan," Keio/Kyoto Joint Global COE Discussion Paper Series 2011-035, Keio/Kyoto Joint Global COE Program.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.