Trends and affordability of cigarette prices: ample room for tax increases and related health gains
- 1World Health Organization, Tobacco Free Initiative, Geneva, Switzerland
- 2Organisation for Economic Co-Operation and Development, Paris, France
- 3World Health Organization, Noncommunicable Diseases and Mental Health, Geneva, Switzerland
- Correspondence to: G Emmanuel Guindon, World Health Organization, Tobacco Free Initiative, Avenue Appia 20, 1211 Geneva 27, Switzerland;
- Received 30 March 2001
- Accepted 30 November 2001
- Revised 20 June 2001
Background: Increasing the price of tobacco products is arguably the most effective method of curbing the prevalence and consumption of tobacco products. Price increases would reduce the global burden of disease brought about by tobacco consumption.
Objectives: To compare cigarette price data from more than 80 countries using varying methods, examine trends in prices and affordability during the 1990s, and explore various policy implications pertaining to tobacco prices.
Design: March 2001 cigarette price data from the Economist Intelligence Unit are used to compare cigarette prices across countries. To facilitate comparison and to assess affordability, prices are presented in US dollars, purchasing power parity (PPP) units using the Big Mac index as an indicator of PPP and in terms of minutes of labour required to purchase a pack of cigarettes. Annual real percentage changes in cigarette prices between 1990 and 2000 and annual changes in the minutes of labour required to buy cigarettes between 1991 and 2000 are also calculated to examine trends.
Results: Cigarette prices tend to be higher in wealthier countries and in countries that have strong tobacco control programmes. On the other hand, minutes of labour required to purchase cigarettes vary vastly between countries. Trends between 1990 and 2000 in real prices and minutes of labour indicate, with some exceptions, that cigarettes have become more expensive in most developed countries but more affordable in many developing countries. However, in the UK, despite recent increases in price, cigarettes are still more affordable than they were in the 1960s.
Conclusions: The results suggest that there is ample room to increase tobacco prices through taxation. In too many countries, cigarette prices have failed to keep up with increases in the general price level of goods and services, rendering them more affordable in 2000 than they were at the beginning of the decade. Opportunities to increase government revenue and improve health through reduced consumption brought about by higher prices have been overlooked in many countries.
- CPI, consumer price index
- EIU, Economist Intelligence Unit
- EU, European Union
- FCTC, Framework Convention on Tobacco Control
- GCC, Gulf Cooperation Council
- LCU, local currency unit
- PPP, purchasing power parity
- UBS, Union Bank of Swizerland
↵* Affordability is defined as cost in terms of income.
↵† Grossman and colleagues2 conclude that one consistent result throughout most price elasticity studies is that about 50% of the change generated by price increases is caused by a reduction in consumption among remaining smokers. More recently, Harris,3 Chaloupka and Wechsler,4 and Farrelly and Bray5 found similar results.
↵§ The Economist Intelligence Unit, part of The Economist Group, is a business information provider with offices in London, New York, HongKong Special Administrative Region of China, Singapore, and Cambridge (USA).
↵¶ Where the Marlboro brand is not available, the EIU surveys the nearestequivalent international brand. For example, in Zimbabwe where theMarlboro brand is not available, the data refers to Benson and Hedgesand Dunhills.
↵** Cigarette prices can be significantly different within countries.
↵†† For more details on the advantages and disadvantages of using theBig Mac as an indicator of PPP see Pakko and colleagues20and The Economist Big MacCurrencies, 29 April 2000. URL: http://www.economist.com/markets/bigmac/displaystory.cfm?story_id=305167
↵‡‡ Average wages are based on actual wages in 12 occupations aftertaking into account working time, holidays, and vacations. The 12occupations are: primary school teachers, bus drivers, automobilemechanics, building labourers, skilled industrial workers, cooks,department managers, electrical or mechanical engineers, bank creditclerks, secretaries, saleswomen, and female industrial workers.
↵§§ Correlation coefficient ( r) between annual changes in real price andannual change in minutes of labour is 0.55 for Marlboro and 0.53 forlocal brand (n = 35).
↵¶¶ Correlation coefficients between real change in prices (Marlboro andlocal brand) and gross domestic product per capita at PPP in the year2000 are 0.45 and 0.29 (n = 67 and n = 63), respectively. The 2000per capita gross domestic product PPP data were obtained from the EIU(http://countrydata.bvdep.com/).