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Price Elasticity Estimates for Cigarette Demand in Vietnam

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  • Patrick Eozenou

    ()
    (European University Institute, Villa San Paolo, Via Della Piazzuola 43, 50133 Florence, Italy)

  • Burke Fishburn

    (World Health Organization and Center for Disease Control.)

Abstract

In this paper, we analyze a complete demand system to estimate the price elasticity for cigarette demand in Vietnam. Following Deaton (1990), we build a spatial panel using cross sectional household survey data. We consider a model of simultaneous choice of quantity and quality. This allows us to exploit unit values from cigarette consumption in order to disentangle quality choice from exogenous price variations. We then rely on spatial variations in prices and quantities demanded to estimate an Almost Ideal Demand System. The estimated price elasticity for cigarette demand is centered around -0.53, which is in line with previous empirical studies for developing countries.

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Bibliographic Info

Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 05.

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Length: 27 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:dpc:wpaper:0509

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Keywords: Price elasticity; Cigarette Demand; Taxation; Consumption; Vietnam.;

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  1. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, American Economic Association, vol. 65(3), pages 367-83, June.
  2. Deaton, A., 1988. "Price Elasticities From Survey Data: Extensions And Indonesian Results," Papers, Princeton, Woodrow Wilson School - Development Studies 138, Princeton, Woodrow Wilson School - Development Studies.
  3. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 31(1), pages 93-118, February.
  4. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, American Economic Association, vol. 70(3), pages 312-26, June.
  5. L. Wade, 1988. "Review," Public Choice, Springer, Springer, vol. 58(1), pages 99-100, July.
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