Estimación de demanda de cigarrillos en Uruguay: análisis en base a encuestas de gastos e ingresos de los hogares

This study estimates the total demand for cigarettes (both licit and illicit) in Uruguay, utilizing data from the most recent National Household Expenditure and Income Survey (ENGIH) conducted by the National Institute of Statistics (INE) between 2016 and 2017. The method employed is the Almost Ideal Demand System (AIDS), originally developed by Deaton. This method leverages the spatial variance of prices as a tool to address potential endogeneity issues, simultaneously correcting for Heckman selection bias. The findings reveal a price elasticity of -0.639, indicating that a 10% increase in the price of a cigarette pack would result in a 6.39% decrease in total cigarette consumption. Additionally, an expenditure elasticity of 0.107 signifies that a 10% rise in spending would lead to a 1.07% increase in consumption. Analysis based on expenditure tertiles suggests that households in the lowest tertile, representing the lowest socioeconomic level, exhibit an elastic demand. Specifically, their price elasticity surpasses the average, standing at -1.391. This implies that a 10% price hike would cause their demand to drop by approximately 14%.