The Compensative Effects of Tobacco Leaf Price Changes on Tax Revenue in China
Tobacco production in China is influenced by a government-set procurement price for tobacco leaf, and an excise tax on tobacco leaf revenue. This study examines the increase in the procurement price needed to keep tax revenue constant in the face of a 50% reduction in the tax rate. This “compensative effect” is important because reductions in the tax rate are contemplated and tobacco tax revenue is a major source of funding for rural communities. Based on an equilibrium-displacement model of China’s tobacco sector, results suggest the “Compensated Effect Elasticity” (CEE) is between 1.0 and 2.5. This means a 50% cut in the tax rate would necessitate an increase in the procurement price of between 50% and 125%. Sensitivity analysis indicates CEE is most sensitive to the retail demand and input substitution elasticities and least sensitive to oligopoly power and returns to scale.
|Date of creation:||2009|
|Contact details of provider:|| Web page: http://www.saea.org/|
More information through EDIRC
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.:
- J. W. Freebairn & J. S. Davis & G. W. Edwards, 1983. "Distribution of Research Gains in Multistage Production Systems: Reply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 357-359.
- 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.
- 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).
- J. M. Alston & G. M. Scobie, 1983. "Distribution of Research Gains in Multistage Production Systems: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 353-356.
- 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.
- 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.
- Bai Yuanliang & Zhang Zongyi, 2005. "Aggregate cigarette demand and regional differences in China," Applied Economics, Taylor & Francis Journals, vol. 37(21), pages 2523-2528.
- BISHOP, John A. & Liu, Haiyong & Meng, Qi, 2007. "Are Chinese smokers sensitive to price?," China Economic Review, Elsevier, vol. 18(2), pages 113-121.
- Waterson, Michael, 1980. "Oligopoly and derived demand," Economics Letters, Elsevier, vol. 5(2), pages 115-118.
- Azzeddine Azzam, 1998. "Captive Supplies, Market Conduct, and the Open-Market Price," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 76-83. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ags:saeana:46727. 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: (AgEcon Search)
If references are entirely missing, you can add them using this form.