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Prices and cross-border cigarette purchases in the EU: evidence from demand modelling
  1. Michal Stoklosa
  1. Economic and Health Policy Research, American Cancer Society, Atlanta GA 30303, USA
  1. Correspondence to Michal Stoklosa, International Tobacco Control Research, American Cancer Society, Atlanta GA 30303, USA; michal.stoklosa{at}cancer.org

Abstract

Background Previous studies of cross-border cigarette purchases in the European Union (EU) relied on survey-reported data. Results of those studies might be affected by under-reporting of tax avoidance in those surveys. This study aims to shed light on the effects of cigarette price differences between EU Member States on cross-border cigarette purchases using a method that is free from potential reporting bias.

Data and methods 2004–2017 pooled time-series data and econometric modelling are used to examine cross-border shopping in the EU. Incentives for cross-border shopping are measured as a function of differences in cigarette prices between bordering countries, controlling for population density near borders. Separate incentive variables are calculated for EU internal versus EU external borders and for terrestrial versus maritime borders. Tax-paid cigarette sales are modelled as a function of cigarette price, per capita income, non-price measures and the incentive variables using fixed-effects models.

Results The estimated price elasticity of cigarette demand varies, depending on the model, from −0.47 to −0.35. The estimated income elasticity varies from 0.66 to 0.70. Between-country price differences are not significantly associated with purchases across maritime borders and across borders with non-EU neighbours. In an average EU Member State, reducing incentives from cross-border shopping down to zero would increase sales by 1.5% in an importing country and reduce sales by about 6% in an exporting country, ceteris paribus.

Conclusion An upward convergence of cigarette prices across EU Member States would reduce cross-border cigarette purchasing and improve public health by contributing to decreases in cigarette consumption.

  • illegal tobacco products
  • price
  • taxation
  • economics

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Footnotes

  • Patient consent for publication Not required.

  • Contributors MS is the sole author of the manuscript.

  • Funding The authors have not declared a specific grant for this research from any funding agency in the public, commercial or not-for-profit sectors.

  • Competing interests None declared.

  • Provenance and peer review Not commissioned; externally peer reviewed.

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