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The effect of Taiwan's tax-induced increases in cigarette prices on brand-switching and the consumption of cigarettes

Author

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  • Yi-Wen Tsai
  • Chung-Lin Yang

    (Division of Health Policy Research, National Health Research Institutes, Miaoli, Taiwan)

  • Chin-Shyan Chen
  • Tsai-Ching Liu
  • Pei-Fen Chen

    (Division of Health Policy Research, National Health Research Institutes, Miaoli, Taiwan)

Abstract

The effect of raising cigarette taxes to reduce smoking has been the subject of several studies, which often treat the price of cigarettes as an exogenous factor given to smokers who respond to it by adjusting their smoking behavior. However, cigarette prices vary with brand and quality, and smokers can and do switch to lower-priced brands to reduce the impact of the tax on the cost of cigarettes as they try to consume the same number of cigarettes as they had before a tax hike. Using data from a two-year follow-up interview survey conducted before and after a new cigarette tax scheme was imposed in Taiwan in 2002, this study examines three behavioral changes smokers may make to respond to tax-induced cigarette price increase: brand-switching, amount consumed, and amount spent on smoking. These changes were studied in relation to smoker income, before-tax cigarette price, level of addiction, exposure to advertizing, and consumer loyalty. We found that smokers, depending upon exposure to advertizing, level of consumer loyalty and initial price of cigarettes, switched brands to maintain current smoking habits and control costs. We also found that the initial amount smoked and level of addiction, not price, at least not at the current levels in Taiwan, determined whether a smoker reduced the number of cigarettes he consumed. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • Yi-Wen Tsai & Chung-Lin Yang & Chin-Shyan Chen & Tsai-Ching Liu & Pei-Fen Chen, 2005. "The effect of Taiwan's tax-induced increases in cigarette prices on brand-switching and the consumption of cigarettes," Health Economics, John Wiley & Sons, Ltd., vol. 14(6), pages 627-641.
  • Handle: RePEc:wly:hlthec:v:14:y:2005:i:6:p:627-641
    DOI: 10.1002/hec.972
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    File URL: http://hdl.handle.net/10.1002/hec.972
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    References listed on IDEAS

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    1. Hai-Yen Sung & Teh-Wei Hu & Theodore E. Keeler, 1994. "Cigarette Taxation And Demand: An Empirical Model," Contemporary Economic Policy, Western Economic Association International, vol. 12(3), pages 91-100, July.
    2. Lanoie, Paul & Leclair, Paul, 1998. "Taxation or regulation:: Looking for a good anti-smoking policy," Economics Letters, Elsevier, vol. 58(1), pages 85-89, January.
    3. repec:aph:ajpbhl:1998:88:9:1389-1391_8 is not listed on IDEAS
    4. Suranovic, Steven M. & Goldfarb, Robert S. & Leonard, Thomas C., 1999. "An economic theory of cigarette addiction," Journal of Health Economics, Elsevier, vol. 18(1), pages 1-29, January.
    5. repec:aph:ajpbhl:1995:85:9:1218-1222_0 is not listed on IDEAS
    6. 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.
    7. repec:aph:ajpbhl:1989:79:2:188-191_9 is not listed on IDEAS
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    Cited by:

    1. Hung-Hao Chang & Tung-liang Chiang, 2009. "Depressive symptoms, smoking, and cigarette price elasticity: results from a population-based survey in Taiwan," International Journal of Public Health, Springer;Swiss School of Public Health (SSPH+), vol. 54(6), pages 421-426, December.
    2. Lin, Tsui-Fang, 2008. "Modifiable health risk factors and medical expenditures - The case of Taiwan," Social Science & Medicine, Elsevier, vol. 67(11), pages 1727-1736, December.
    3. Claudio Agostini, 2010. "Tributación a Los Cigarrillos: Análisis y Propuestas," ILADES-Georgetown University Working Papers inv246, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
    4. Pu, Cheng-yun & Lan, Virginia & Chou, Yiing-Jenq & Lan, Chung-fu, 2008. "The crowding-out effects of tobacco and alcohol where expenditure shares are low: Analyzing expenditure data for Taiwan," Social Science & Medicine, Elsevier, vol. 66(9), pages 1979-1989, May.

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