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Presentation

Session: Posters
Room: TBA
Time: Fri 13:00-14:30

Presenter: Hana Ross (American Cancer Society. Surveillance and Health Policy)

Abstract

Objective: To estimate the price elasticity of cigarette demand in Ukraine and to predict the impact of 173 percent tobacco excise tax increase in Ukraine between 2008 and 2009.
Methods: The price elasticity of cigarette demand is estimated using 2007 and 2008 data on cigarette prices and cigarette consumption. A simulation model is then developed based on two assumptions: a tax increase is fully passed on to consumers and the level of illicit trade in cigarettes stays constant. The public health impact of the tax increase is measured by the reduction in the number of smokers. Productivity gains due to lower premature mortality among the 2009 cohort is calculated based on the linear relationship between cigarette consumption and tobacco-related mortality.
Results: The price elasticity of cigarette demand is -0.25. The model predicts that the multiple excise tax increases in 2009 will result in a 35 percent rise in real cigarette prices, 935 thousand fewer smokers, and productivity gains of at least UAH 1.4 billion (US$ 174 million). Tobacco excise tax revenue in 2009 is expected to exceed the 2008 revenue 2.7 times.
Conclusions: The result suggests relatively low price responsiveness of cigarette demand, possibly due to the wide range of cigarette prices and high social acceptability of smoking. While the simulation model predicts encouraging public health and economic gains from the 2009 tax increases, it will be important that cigarette prices and cigarette taxes keep pace with inflation and income growth for a sustained impact.

Key Terms

Ukraine, price elasticity of cigarette demand, tobacco tax

Authors:

Hana Ross (American Cancer Society. Surveillance and Health Research) and Konstantin Krasovsky (Institute of Strategic Research . Ministry of Health, Ukraine)

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