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An international analysis of cigarette affordability
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  1. E H Blecher,
  2. C P van Walbeek
  1. School of Economics, University of Cape Town, Cape Town, South Africa
  1. Correspondence to:
 Mr Corné P van Walbeek
 School of Economics, University of Cape Town, Cape Town 7701, South Africa; cwalbeekcommerce.uct.ac.za

Abstract

Objective: To investigate how affordable cigarettes are in developed and developing countries, and to calculate by how much the affordability of cigarettes has changed between 1990 and 2001; and secondly, to investigate the relation between cigarette affordability and consumption.

Design: Affordability was defined as the cost of cigarettes relative to per capita income. Trends in cigarette affordability, and affordability elasticities of demand, were estimated using regression techniques.

Subjects: Seventy countries were investigated, of which 28 are categorised as high income developed countries, while 42 are categorised as developing countries. Cigarette prices were obtained for the main city/cities in the countries.

Results: Despite the fact that cigarettes are more expensive in developed countries, the high levels of income make cigarettes more affordable in these countries vis-à-vis developing countries. Of the 28 developed countries, cigarettes became more affordable in 11 and less affordable in 17 countries during the 1990s. Of the 42 developing countries, cigarettes became more affordable in 24 and less affordable in 18 countries. Based on a cross sectional analysis, a 1% increase in the relative income price (the inverse of cigarette affordability) is expected to decrease cigarette consumption by between 0.49–0.57%.

Conclusions: Cigarette affordability, more than just the price, determines cigarette consumption. While cigarettes have become more affordable in many developing countries, some developing countries (for example, South Africa, Poland, and Thailand) have implemented strong and effective tobacco control policies, and have been able to decrease cigarette consumption as a result.

  • EIU, Economist Intelligence Unit
  • GDP, gross domestic product
  • RIP, relative income price
  • UBS, Union Bank of Switzerland
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Footnotes

  • * According to the World Bank, countries are classified as high, upper middle, lower middle, or low income countries. In this paper the term middle income countries refers to both upper and lower middle income countries.

  • Gross wages are adjusted for differences in working time, holidays and vacations. The 12 occupations are primary school teachers, bus drivers, automobile mechanics, building labourers, skilled industrial workers, cooks, department managers, electrical or mechanical engineers, bank credit clerks, secretaries, saleswomen, and female industrial workers.

  • These countries are Austria (increase in affordability of Marlboro only), Canada, Denmark, India, Japan, Malaysia, the Philippines, Portugal, Sweden, and Taiwan.

  • §The price data used is from the same source as used by Guindon et al. The EIU collects data from three sources although only two were provided by them and thus the third source is not used in this study.

  • ** Some judgment, rather than a fixed rule, was applied here. As a general principle, if the RIP changed by more than 40% from one year to the next, and this was not the start of a new price trend (which would presumably be the result of a conscious tobacco control strategy), the observation was ignored. The full dataset, including the values that have been excluded from the subsequent analysis, is available at (http://www.commerce.uct.ac.za/Economics/staff/cwalbeek/Documents/blecher_and_van_walbeek_2004.xls)

  • †† This entails fitting the following regression line: ln(RIPt) = α+βt+et where t = 0, 1, 2, …. The estimated value of β is the weighted constant growth rate of the RIP.

  • ‡‡ Two countries, Papua New Guinea and the United Arab Emirates, are included in this analysis, even though they were excluded in the analysis presented in fig 1 and 2. The reason for their exclusion in earlier analysis is because data did not exist for the period 1999 through 2001. They are included here, because earlier data are available.

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