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The Welfare Effects of Tobacco Taxation: Estimates for 5 Countries/Regions

Author

Listed:
  • Lal Deepak

    (University of California, Los Angeles)

  • Kim Hyongwon

    (University of California, Los Angeles)

  • Lu Gonglu

    (University of California, Los Angeles)

  • Prat Jordi

    (University of California, Los Angeles)

Abstract

This paper provides estimates of the economic welfare effects of tobacco taxation in India, S.Africa, S.Korea, Japan and the European Union. It argues that past studies of the cost-benefits of smoking are flawed as they fail to net out Paretoirrelevant pecuniary externalities. It estimates tobacco demand for both the myopic and rational addiction models and finds the latter invariably perform better. It finds that the net welfare losses associated with (a) current tax levels (b)an increase over current taxation of 10% and (c) an increase of 10% a year for !0 years in all these countries, but particularly in the poorest, are large.Cet article fournit des estimations des effets des taxes sur le tabac sur le bien-être : l'Inde, l'Afrique du Sud, la Corée du Sud, le Japon et l'Union Européenne. L'article soutient que les analyses antérieures des coûts et des bénéfices de la cigarette sont erronées car elles ne tiennent pas compte des externalités pécuniaires non pertinentes dans un monde parétien. Il donne des estimations de la demande non tant pour les modèles myopes que pour ceux supposant une addiction rationnelle et constate que ces derniers donnent de meilleurs résultats. Il en ressort aussi que les pertes nettes de bien-être associées (a) aux niveaux actuels de taxes, (b) à une augmentation de 10% des taxes actuelles et (c) à une augmentation annuelle de 10% des taxes sur 10 ans dans toutes les zones étudiées, mais particulièrement dans les plus pauvres d'entre elles, sont conséquentes.

Suggested Citation

  • Lal Deepak & Kim Hyongwon & Lu Gonglu & Prat Jordi, 2003. "The Welfare Effects of Tobacco Taxation: Estimates for 5 Countries/Regions," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 13(1), pages 1-20, March.
    • Handle: RePEc:bpj:jeehcn:v:13:y:2003:i:1:n:1
    DOI: 10.2202/1145-6396.1081
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    References listed on IDEAS

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    1. Deepak Lal, 1994. "The Role of the Public and Private Sectors in Health Financing in Developing Countries," UCLA Economics Working Papers 717, UCLA Department of Economics.
    2. 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.
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