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Price Elasticity Estimates of Cigarette Demand in Vietnam

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  • Eozenou, Patrick
  • Fishburn, Burke

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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File URL: http://mpra.ub.uni-muenchen.de/12779/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12779.

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Date of creation: Sep 2001
Date of revision: Nov 2007
Handle: RePEc:pra:mprapa:12779

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

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  1. Deaton, A., 1990. "Price Elasticities From Surveys Data: Extensions And Indonesian Results," Papers 69, World Bank - Living Standards Measurement.
  2. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  3. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  4. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  5. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-83, June.
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