The Trade and Health Effects of Tobacco Regulations

This paper examines how domestic and foreign tobacco regulations affect tobacco trade flows and consumer health in importing countries. We develop a gravity equation incorporating domestic and foreign tobacco regulations into a country’s tobacco import demand. We estimate the bilateral trade effects of marketing, counter-advertising, age and smoking tobacco location regulations. There are two striking results: smoking location regulations reduce tobacco exports and imports, and marketing regulations may actually increase tobacco trade. The magnitude of these effects is larger when the trading partners are rich exporters and poor importers. Using existing health effect elasticities in conjunction with our results, we show how these changes affect tobacco-related mortality and morbidity in importing countries. Our results highlight the importance of implementing policies that account for potential spillover effects in an increasingly multilateral economy.