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Tobacco taxes and regressivity

  • Gospodinov, Nikolay
  • Irvine, Ian

Recent literature on tobacco taxation suggests that optimal tax rates should be very high. But such high taxes raise concerns over regressivity. Most econometric estimates of elasticities by income group use historic price data that are low, and the usefulness of such estimates is therefore questionable on account of the serious 'out of sample' prediction problem. To address that problem, this paper estimates price elasticities for different socioeconomic groups using recent Canadian survey data for a period during which prices rose to a level of about $7 per pack. The results provide little reason to overturn the traditional concerns about regressivity.

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Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 28 (2009)
Issue (Month): 2 (March)
Pages: 375-384

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Handle: RePEc:eee:jhecon:v:28:y:2009:i:2:p:375-384
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  17. Nikolay Gospodinov & Ian Irvine, 2005. "A `long march' perspective on tobacco use in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 366-393, May.
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