Quantity, quality, and regional price variation of cigarettes: Demand analysis based on a household survey in China
This paper investigates the price elasticity of cigarettes using an urban household survey in China. We find that cigarette price is an important determinant of smoking. In our two-part model, the overall price elasticity is -Â 0.82. Nevertheless, tobacco demand is influenced by both price and quality. We net out the quality effect of tobacco demand to obtain standard price elasticities, which are between -Â 0.70 and -Â 0.35. In addition, when we estimate two demand systems of Chinese households, the estimated own-price elasticities of cigarettes are -Â 0.57 and -Â 0.81. These elasticities suggest that if the tobacco excise tax rate goes up, cigarette consumption will drop rapidly, and government revenue from the tobacco tax will increase.
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.:
- Deaton, Angus, 1990.
"Price elasticities from survey data : Extensions and Indonesian results,"
Journal of Econometrics,
Elsevier, vol. 44(3), pages 281-309, June.
- Deaton, A., 1988. "Price Elasticities From Survey Data: Extensions And Indonesian Results," Papers 138, Princeton, Woodrow Wilson School - Development Studies.
- Deaton, A., 1990. "Price Elasticities From Surveys Data: Extensions And Indonesian Results," Papers 69, World Bank - Living Standards Measurement.
- Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," World Bank Economic Review, World Bank Group, vol. 11(2), pages 357-382, May.
- Ravallion, Martin & Shaohua Chen, 1996. "What can new survey data tell us about recent changes in distribution and poverty?," Policy Research Working Paper Series 1694, The World Bank.
- Crawford, Ian & Laisney, Francois & Preston, Ian, 2003. "Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications," Journal of Econometrics, Elsevier, vol. 114(2), pages 221-241, June.
- Preston, Ian & Laisney, François & Crawford, Ian A., 2002. "Estimation of Household Demand Systems with Theoretically Compatible Engel Curves and Unit Value Specifications," ZEW Discussion Papers 97-06 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Ian Crawford & Francois Laisney & Ian Preston, 2002. "Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications," IFS Working Papers W02/17, Institute for Fiscal Studies.
- Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
- Chamon, Marcos & Prasad, Eswar, 2007. "Why Are Saving Rates of Urban Households in China Rising?," IZA Discussion Papers 3191, Institute for the Study of Labor (IZA).
- Marcos Chamon & Eswar Prasad, 2008. "Why are Saving Rates of Urban Households in China Rising?," IMF Working Papers 08/145, International Monetary Fund.
- Marcos Chamon & Eswar Prasad, 2008. "Why are Saving Rates of Urban Households in China Rising?," NBER Working Papers 14546, National Bureau of Economic Research, Inc.
- Escario, Jose Julian & Molina, Jose Alberto, 2004. "Modeling the optimal fiscal policy on tobacco consumption," Journal of Policy Modeling, Elsevier, vol. 26(1), pages 81-93, January.
- Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-430, June.
- Deaton, A., 1988. "Quality, Quantity, And Spatial Variation Of Price," Papers 30, World Bank - Living Standards Measurement.
- Chalfant, James A, 1987. "A Globally Flexible, Almost Ideal Demand System," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 233-242, April.
- 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.
- 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," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2005-003, Indira Gandhi Institute of Development Research, Mumbai, India.
- Chaloupka, Frank J. & Warner, Kenneth E., 2000. "The economics of smoking," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 29, pages 1539-1627 Elsevier.
- Frank J. Chaloupka & Kenneth E. Warner, 1999. "The Economics of Smoking," NBER Working Papers 7047, National Bureau of Economic Research, Inc.
- 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.
- Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
- Yoko Niimi, 2005. "An Analysis of Household Responses to Price Shocks in Vietnam: Can Unit Values Substitute for Market Prices?," PRUS Working Papers 30, Poverty Research Unit at Sussex, University of Sussex.
- BISHOP, John A. & Liu, Haiyong & Meng, Qi, 2007. "Are Chinese smokers sensitive to price?," China Economic Review, Elsevier, vol. 18(2), pages 113-121.
- Deaton, Angus, 1986. "Demand analysis," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 30, pages 1767-1839 Elsevier.
- Yen, Steven T. & Fang, Cheng & Su, Shew-Jiuan, 2004. "Household food demand in urban China: a censored system approach," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 564-585, September.
- Nicita, Alessandro, 2004. "Efficiency and equity of a marginal tax reform - income, quality, and price elasticities for Mexico," Policy Research Working Paper Series 3266, The World Bank.
- Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
- Lance, Peter M. & Akin, John S. & Dow, William H. & Loh, Chung-Ping, 2004. "Is cigarette smoking in poorer nations highly sensitive to price?: Evidence from Russia and China," Journal of Health Economics, Elsevier, vol. 23(1), pages 173-189, January.
- Tansel, A., 1992. "Cigarette Demand, Health Scares and Education in Turkey," Papers 660, Yale - Economic Growth Center.
- Sayginsoy, Ozgen & Yurekli, Ayda A. & de Beyer, Joy, 2002. "Cigarette Demand, Taxation, and the Poor: A Case Study of Bulgaria," University of California at San Francisco, Center for Tobacco Control Research and Education qt35g997q4, Center for Tobacco Control Research and Education, UC San Francisco.
- Pogue, Thomas F & Sgontz, Larry G, 1989. "Taxing to Control Social Costs: The Case of Alcohol," American Economic Review, American Economic Association, vol. 79(1), pages 235-243, March.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, November. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:22:y:2011:i:2:p:221-232. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If references are entirely missing, you can add them using this form.