Price elasticity estimates for tobacco and other addictive goods in India
AbstractThe tax base of tobacco in India is found to be heavily depended on about fifteen percent of the tobacco users who represent cigarettes smokers. Non-cigarette tobacco products used by the majority of tobacco users are largely out of the tax net. Analysis of the price elasticity of various tobacco products would bring out the potential of tax as an instrument to control tobacco use of any kind. In this context, this paper examines how the demand for a variety of tobacco products and addictive goods such as pan and alcohol respond to changes in prices. The spatial variations of prices that are obtained from a cross section of 120,000 households spread across the country have been used for this purpose. Estimates of price elasticities showed that the own price elasticity estimates of various addictive goods in India ranged between -0.5 to -1.0 with bidis, leaf tobacco and alcohol having elasticities close to unity, cigarettes being the least price elastic of all. As against the general notions regarding the complementarity between cigarettes and alcohol, our study nds that these are substitutes at least in urban India. We also observed that, over a five year period, the addictive goods such as bidis and leaf tobacco in India have become slightly more price responsive while elasticity of cigarettes and pan have stabilized. With some assumptions, it is shown that taxes on cigarettes can be raised nearly 2.5 times the current level while that of bidis can be raised tenfold without any fall in revenue.
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.
Bibliographic InfoPaper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2005-003.
Length: 28 pages
Date of creation: Aug 2005
Date of revision:
Contact details of provider:
Postal: Gen. A. K. Vaidya Marg, Goregaon (E), Mumbai 400065
Phone: (022) 840 0919/20/21
Fax: (022) 840 2752/2026
Web page: http://www.igidr.ac.in
More information through EDIRC
Tobacco; Bidi; Cigarette; Alcohol; Consumption; Elasticity; India;
Other versions of this item:
- Rijo John, 2005. "Price Elasticity Estimates for Tobacco and Other Addictive Goods in India," Working Papers id:117, eSocialSciences.
- 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.
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-11 (All new papers)
- NEP-CWA-2005-09-11 (Central & Western Asia)
- NEP-HEA-2005-09-11 (Health Economics)
- NEP-MIC-2005-09-11 (Microeconomics)
- NEP-PBE-2005-09-11 (Public Economics)
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.:
- Rijo M John, 2009.
"An Analysis of Household's Tobacco Consumption Decisions: Evidence from India,"
- Rijo M John, 2004. "An Analysis of Household's Tobacco Consumption Decisions : Evidence from India," Microeconomics Working Papers 22393, East Asian Bureau of Economic Research.
- Rijo John, 2004. "An analysis of household's tobacco consumption decisions: Evidence from India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2004-002, Indira Gandhi Institute of Development Research, Mumbai, India.
- Directorate General & Economic and Financial Affairs, 2000. "Conference "Enterprises 2002" - 6 June 2000," Papers 40, Commission of the EEC - Euro Papers.
- John, Rijo M., 2005. "Tobacco consumption patterns and its health implications in India," Health Policy, Elsevier, vol. 71(2), pages 213-222, February.
- Susan H. Busch & Mireia Jofre-Bonet & Tracy A. Falba & Jody L. Sindelar, 2004. "Tobacco Spending and its Crowd-Out of Other Goods," NBER Working Papers 10974, National Bureau of Economic Research, Inc.
- Kenneth Clements & Wana Yang & Simon Zheng, 1997. "Is utility additive? The case of alcohol," Applied Economics, Taylor and Francis Journals, vol. 29(9), pages 1163-1167.
- Frank J. Chaloupka & Kenneth E. Warner, 1999.
"The Economics of Smoking,"
NBER Working Papers
7047, National Bureau of Economic Research, Inc.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Chen, Yuyu & Xing, Weibo, 2011. "Quantity, quality, and regional price variation of cigarettes: Demand analysis based on a household survey in China," China Economic Review, Elsevier, vol. 22(2), pages 221-232, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamprasad M. Pujar).
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.