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The role of tobacco taxes in starting and quitting smoking: duration analysis of British data

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  • Martin Forster
  • Andrew Jones

Abstract

This paper presents new evidence on the determinants of starting and quitting smoking using duration data from the British Health and Lifestyle Survey (HALS). Self-reported data in individual smoking histories coupled with availability of a long time series for the tax rate on cigarettes are used to construct a longitudinal data set in which the tax rate is treated as a time varying covariate. This overcomes the problem of the lack of cross section variation in process that has plagued previous studies of smoking in Britain. The study is the first to identify tax-price elasticities for starting and quitting in Britain. Results for age of starting smoking prior to quitting are reported for Cox, Weibull and gamma models. All of the models are estimated separately for males and females and extensive diagnostic tests are used to guide model specification. A sensitivity analysis is used to assess the robustness of the estimated tax elasticities for starting and quitting. Since the early 1990s successive governments have had a commitment to annual increases in the real level of tobacco taxes, to achieve health policy objectives and encourage people to stop smoking. Our estimated price elasticities directly relate to the impact of above inflation tax rises on the number of years smoked by current smokers. The estimates of the impact of tax on the probability of starting and the age of starting are not encouraging as we do not find a significant effect. However the point estimates of the elasticity of quitting are well defined for males and robust for both males and females. All of our point estimates are in the range -0.40 to -0.63. If the typical number of years smoked is 25 years this implies that the 5% real increase in tobacco duty would lead, on average, to a reduction of between 6 and 9.5 months of smoking for each smoker. Recent estimates suggest that there are around 12.1 million current smokers in the UK (ASH 1999). Thus the potential saving in total number of years smoked across the population is substantial.

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File URL: http://www.york.ac.uk/media/che/documents/papers/discussionpapers/CHE%20Discussion%20Paper%20176.pdf
File Function: First version, 2000
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Bibliographic Info

Paper provided by Centre for Health Economics, University of York in its series Working Papers with number 176chedp.

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Length: 29 pages
Date of creation: Jan 2000
Date of revision:
Handle: RePEc:chy:respap:176chedp

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Related research

Keywords: smoking initiation and cessation; tobacco taxes; duration analysis; tobacco;

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References

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  1. Lewit, Eugene M. & Coate, Douglas, 1982. "The potential for using excise taxes to reduce smoking," Journal of Health Economics, Elsevier, vol. 1(2), pages 121-145, August.
  2. Eugene M. Lewit & Douglas Coate & Michael Grossman, 1981. "The Effects of Government Regulation on Teenage Smoking," NBER Working Papers 0655, National Bureau of Economic Research, Inc.
  3. Chaloupka, Frank, 1991. "Rational Addictive Behavior and Cigarette Smoking," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 722-42, August.
  4. Douglas, Stratford & Hariharan, Govind, 1994. "The hazard of starting smoking: Estimates from a split population duration model," Journal of Health Economics, Elsevier, vol. 13(2), pages 213-230, July.
  5. Shmueli, Amir, 1996. "Smoking cessation and health: A comment," Journal of Health Economics, Elsevier, vol. 15(6), pages 751-754, December.
  6. Jones, Andrew M, 1989. "A Double-Hurdle Model of Cigarette Consumption," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 23-39, Jan.-Mar..
  7. Dorsett, Richard, 1999. "An econometric analysis of smoking prevalence among lone mothers," Journal of Health Economics, Elsevier, vol. 18(4), pages 429-441, August.
  8. Frank J. Chaloupka & Henry Wechsler, 1995. "Price, Tobacco Control Policies and Smoking Among Young Adults," NBER Working Papers 5012, National Bureau of Economic Research, Inc.
  9. Frank J. Chaloupka & Michael Grossman, 1996. "Price, Tobacco Control Policies and Youth Smoking," NBER Working Papers 5740, National Bureau of Economic Research, Inc.
  10. Tunali, Insan & Pritchett, Jonathan B, 1997. "Cox Regression with Alternative Concepts of Waiting Time: The New Orleans Yellow Fever Epidemic of 1853," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(1), pages 1-25, Jan.-Feb..
  11. Jeffrey E. Harris & Sandra W. Chan, 1999. "The continuum-of-addiction: cigarette smoking in relation to price among Americans aged 15-29," Health Economics, John Wiley & Sons, Ltd., vol. 8(1), pages 81-86.
  12. Douglas, Stratford, 1998. "The Duration of the Smoking Habit," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 49-64, January.
  13. John A. Tauras & Frank J. Chaloupka, 1999. "Determinants of Smoking Cessation: An Analysis of Young Adult Men and Women," NBER Working Papers 7262, National Bureau of Economic Research, Inc.
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