Background The objective of this study is to estimate the sensitivity of cigarette quantity demanded to price and income changes in Montenegro.
Data and methods The sensitivity of cigarette quantity demanded to price and income changes was estimated using micro and macro analysis. Micro analysis implied the use of Deaton’s model on Household Budget Survey data (2006–2017). In macro analysis, conventional static demand model is applied using error correction and autoregressive distributed lag time series methodology on annual time series aggregated data (2001–2017).
Results The same results were obtained using micro and macro analysis which contributes to the objectivity of the conducted research. Results derived from the Deaton’s model indicate a negative price elasticity of cigarettes in the range between −0.62 and −0.80 (conditional and unconditional), while in macro model estimated price elasticity is in that range and equals −0.68. Simulation results confirm the efficiency of excise tax policy changes, having an evident decrease in consumption and increase of public revenues.
Conclusion Analysis of the tobacco market and regulatory environment suggests that the increase of excise and other taxes on tobacco have an important direct impact on the reduction of cigarettes and other tobacco products consumption. Our estimates of long and short-run price elasticity show that direct impact is strong and very much in accordance with the results obtained so far for other low-income and middle-income countries. This paper gives a contribution to the analysis of price elasticity of demand for cigarettes, which was for the first time conducted in Montenegro.
- low/middle income country
- public policy
- global health
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Contributors AM and MČ collected data, conducted the data analysis and wrote the first draft. TL and MP contributed in developing ideas, data interpretation, revision and approval of the different paper drafts.
Funding This research was funded by the University of Illinois at Chicago (UIC) Institute for Health Policy and Research. UIC is a core partner of the Bloomberg Initiative to Reduce Tobacco Use.
Disclaimer The statements and conclusions expressed in this research are those of the authors and do not necessarily reflect those of the sponsors.
Competing interests None declared.
Patient consent for publication Not required.
Provenance and peer review Not commissioned; externally peer reviewed.
Data availability statement Publicly available data were obtained from the Statistical Office of Montenegro,
open access repository, linkhttps://www.monstat.org/cg/publikacije.php?id=100
Some data are obtained from a third party and are not publicly available. Household Budget Survey Data is not publicly available (data obtained from the Statistical Office of Montenegro).
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