The substitution effect of cigarette excise tax for tobacco leaf tax in China
Purpose – The purpose of this paper is to examine the increase in the cigarette excise tax needed to keep tax revenue constant in the face of the cancellation of the tobacco leaf tax. Design/methodology/approach – Equilibrium-displacement model was employed to simulate the substitution effect. Findings – The results suggest the “substitution effect elasticity (SEE)” is between -0.127 and -0.063. This means a 100 per cent cut in the tobacco leaf tax rate would necessitate an increase in the cigarette excise tax rate of between 6.3 and 12.7 per cent. Sensitivity analysis indicates SEE is most sensitive to the retail demand elasticity and oligopoly power and least sensitive to input substitution elasticity and returns to scale. Originality/value – This paper provides a framework to analyze the policy effects of the Chinese tobacco industry. The findings in this study are very important for government to make policies in the future.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 2 (2010)
Issue (Month): 4 (November)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com |
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/caer.htm Email:
References listed on IDEAS
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.:
- Kinnucan, Henry W., 2002.
"Optimal Generic Advertising In An Imperfectly Competitive Food Industry With Variable Proportions,"
2002 Annual meeting, July 28-31, Long Beach, CA
19775, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Kinnucan, Henry W., 2003. "Optimal generic advertising in an imperfectly competitive food industry with variable proportions," Agricultural Economics, Blackwell, vol. 29(2), pages 143-158, October.
- Waterson, Michael, 1980. "Oligopoly and derived demand," Economics Letters, Elsevier, vol. 5(2), pages 115-118.
- Habtu Tadesse Weldegebriel, 2004. "Imperfect Price Transmission: Is Market Power Really to Blame?," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(1), pages 101-114.
- Kinnucan, Henry W., 2003. "Optimal generic advertising in an imperfectly competitive food industry with variable proportions," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 29(2), October.
- BISHOP, John A. & Liu, Haiyong & Meng, Qi, 2007. "Are Chinese smokers sensitive to price?," China Economic Review, Elsevier, vol. 18(2), pages 113-121.
- Bai Yuanliang & Zhang Zongyi, 2005. "Aggregate cigarette demand and regional differences in China," Applied Economics, Taylor & Francis Journals, vol. 37(21), pages 2523-2528.
- Xiuqing Wang & Habtu Tadesse & Tony Rayner, . "Price Transmission, Market Power And Returns To Scale: A Note," Discussion Papers 06/07, University of Nottingham, School of Economics.
- S McCorriston & CW Morgan & AJ Rayner, 2001. "Price transmission: the interaction between market power and returns to scale," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 28(2), pages 143-159, June.
- Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
When requesting a correction, please mention this item's handle: RePEc:eme:caerpp:v:2:y:2010:i:4:p:385-395. 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: (Virginia Chapman)
If references are entirely missing, you can add them using this form.