Long-Run Impacts of Increasing Tobacco Taxes
Tobacco taxes are considered an effective policy tool to reduce tobacco consumption and produce long-run benefits that outweigh the costs associated with a price increase. Through this policy, some of the most adverse effects and economic costs of smoking can be reduced, including shorter life expectancy, higher medical expenses, added years of disability among smokers, and the effects of secondhand smoke. Nonetheless, tobacco taxes are often considered regressive because low-income households tend to allocate a larger share of their budgets to purchasing tobacco products. This paper uses an extended cost-benefit analysis to estimate the distributional effect of tobacco taxes on household welfare in South Africa. The analysis considers the effect on household income through an increase in tobacco prices, changes in medical expenses, and the prolongation of working years. Results indicate that a rise in tobacco prices initially generates negative income variations across all groups in the population. If benefits through lower medical expenses and an expansion in working years are considered, the negative effect is reduced, particularly in medium- and upper-bound elasticities. Consequently, the aggregate net effect is progressive and benefits the bottom deciles more than the richer ones. Overall, tobacco tax increases exert a small, but positive effect in the presence of low conditional tobacco price elasticity. If the population is more responsive to tobacco price changes (or participation elasticity estimates are included) then they would experience even more gains from the health and work benefits. More research is needed to clarify the distributional effects of tobacco taxation in South Africa.
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| Format: | Report biblioteca |
| Language: | English |
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World Bank, Washington, DC
2018-02-26
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| Subjects: | TOBACCO CONTROL, TOBACCO TAX, SIN TAX, TOBACCO CONSUMPTION, TAXATION, COST BENEFIT ANALYSIS, HOUSEHOLD WELFARE, DISTRIBUTIONAL IMPACT, REGRESSIVE TAX, PROGRESSIVE TAX, PRICE ELASTICITY, MEDICAL EXPENSES, LONGEVITY, |
| Online Access: | http://documents.worldbank.org/curated/en/705011519972901407/Long-run-impacts-of-increasing-tobacco-taxes-evidence-from-South-Africa https://hdl.handle.net/10986/29439 |
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dig-okr-10986294392024-08-07T19:29:16Z Long-Run Impacts of Increasing Tobacco Taxes Evidence from South Africa Fuchs, Alan Del Carmen, Giselle Mukon, Alfred Kechia TOBACCO CONTROL TOBACCO TAX SIN TAX TOBACCO CONSUMPTION TAXATION COST BENEFIT ANALYSIS HOUSEHOLD WELFARE DISTRIBUTIONAL IMPACT REGRESSIVE TAX PROGRESSIVE TAX PRICE ELASTICITY MEDICAL EXPENSES LONGEVITY Tobacco taxes are considered an effective policy tool to reduce tobacco consumption and produce long-run benefits that outweigh the costs associated with a price increase. Through this policy, some of the most adverse effects and economic costs of smoking can be reduced, including shorter life expectancy, higher medical expenses, added years of disability among smokers, and the effects of secondhand smoke. Nonetheless, tobacco taxes are often considered regressive because low-income households tend to allocate a larger share of their budgets to purchasing tobacco products. This paper uses an extended cost-benefit analysis to estimate the distributional effect of tobacco taxes on household welfare in South Africa. The analysis considers the effect on household income through an increase in tobacco prices, changes in medical expenses, and the prolongation of working years. Results indicate that a rise in tobacco prices initially generates negative income variations across all groups in the population. If benefits through lower medical expenses and an expansion in working years are considered, the negative effect is reduced, particularly in medium- and upper-bound elasticities. Consequently, the aggregate net effect is progressive and benefits the bottom deciles more than the richer ones. Overall, tobacco tax increases exert a small, but positive effect in the presence of low conditional tobacco price elasticity. If the population is more responsive to tobacco price changes (or participation elasticity estimates are included) then they would experience even more gains from the health and work benefits. More research is needed to clarify the distributional effects of tobacco taxation in South Africa. 2018-03-08T16:40:44Z 2018-03-08T16:40:44Z 2018-02-26 Report Rapport Informe http://documents.worldbank.org/curated/en/705011519972901407/Long-run-impacts-of-increasing-tobacco-taxes-evidence-from-South-Africa https://hdl.handle.net/10986/29439 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank application/pdf World Bank, Washington, DC |
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Banco Mundial |
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biblioteca |
| region |
America del Norte |
| libraryname |
Biblioteca del Banco Mundial |
| language |
English |
| topic |
TOBACCO CONTROL TOBACCO TAX SIN TAX TOBACCO CONSUMPTION TAXATION COST BENEFIT ANALYSIS HOUSEHOLD WELFARE DISTRIBUTIONAL IMPACT REGRESSIVE TAX PROGRESSIVE TAX PRICE ELASTICITY MEDICAL EXPENSES LONGEVITY TOBACCO CONTROL TOBACCO TAX SIN TAX TOBACCO CONSUMPTION TAXATION COST BENEFIT ANALYSIS HOUSEHOLD WELFARE DISTRIBUTIONAL IMPACT REGRESSIVE TAX PROGRESSIVE TAX PRICE ELASTICITY MEDICAL EXPENSES LONGEVITY |
| spellingShingle |
TOBACCO CONTROL TOBACCO TAX SIN TAX TOBACCO CONSUMPTION TAXATION COST BENEFIT ANALYSIS HOUSEHOLD WELFARE DISTRIBUTIONAL IMPACT REGRESSIVE TAX PROGRESSIVE TAX PRICE ELASTICITY MEDICAL EXPENSES LONGEVITY TOBACCO CONTROL TOBACCO TAX SIN TAX TOBACCO CONSUMPTION TAXATION COST BENEFIT ANALYSIS HOUSEHOLD WELFARE DISTRIBUTIONAL IMPACT REGRESSIVE TAX PROGRESSIVE TAX PRICE ELASTICITY MEDICAL EXPENSES LONGEVITY Fuchs, Alan Del Carmen, Giselle Mukon, Alfred Kechia Long-Run Impacts of Increasing Tobacco Taxes |
| description |
Tobacco taxes are considered an effective policy tool to reduce tobacco consumption
and produce long-run benefits that outweigh the costs associated
with a price increase. Through this policy, some of the most adverse effects and
economic costs of smoking can be reduced, including shorter life expectancy,
higher medical expenses, added years of disability among smokers, and the
effects of secondhand smoke. Nonetheless, tobacco taxes are often considered
regressive because low-income households tend to allocate a larger share of
their budgets to purchasing tobacco products. This paper uses an extended
cost-benefit analysis to estimate the distributional effect of tobacco taxes on
household welfare in South Africa. The analysis considers the effect on household
income through an increase in tobacco prices, changes in medical expenses, and
the prolongation of working years. Results indicate that a rise in tobacco prices
initially generates negative income variations across all groups in the population.
If benefits through lower medical expenses and an expansion in working years
are considered, the negative effect is reduced, particularly in medium- and
upper-bound elasticities. Consequently, the aggregate net effect is progressive
and benefits the bottom deciles more than the richer ones. Overall, tobacco
tax increases exert a small, but positive effect in the presence of low conditional
tobacco price elasticity. If the population is more responsive to tobacco price
changes (or participation elasticity estimates are included) then they would
experience even more gains from the health and work benefits. More research
is needed to clarify the distributional effects of tobacco taxation in South Africa. |
| format |
Report |
| topic_facet |
TOBACCO CONTROL TOBACCO TAX SIN TAX TOBACCO CONSUMPTION TAXATION COST BENEFIT ANALYSIS HOUSEHOLD WELFARE DISTRIBUTIONAL IMPACT REGRESSIVE TAX PROGRESSIVE TAX PRICE ELASTICITY MEDICAL EXPENSES LONGEVITY |
| author |
Fuchs, Alan Del Carmen, Giselle Mukon, Alfred Kechia |
| author_facet |
Fuchs, Alan Del Carmen, Giselle Mukon, Alfred Kechia |
| author_sort |
Fuchs, Alan |
| title |
Long-Run Impacts of Increasing Tobacco Taxes |
| title_short |
Long-Run Impacts of Increasing Tobacco Taxes |
| title_full |
Long-Run Impacts of Increasing Tobacco Taxes |
| title_fullStr |
Long-Run Impacts of Increasing Tobacco Taxes |
| title_full_unstemmed |
Long-Run Impacts of Increasing Tobacco Taxes |
| title_sort |
long-run impacts of increasing tobacco taxes |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018-02-26 |
| url |
http://documents.worldbank.org/curated/en/705011519972901407/Long-run-impacts-of-increasing-tobacco-taxes-evidence-from-South-Africa https://hdl.handle.net/10986/29439 |
| work_keys_str_mv |
AT fuchsalan longrunimpactsofincreasingtobaccotaxes AT delcarmengiselle longrunimpactsofincreasingtobaccotaxes AT mukonalfredkechia longrunimpactsofincreasingtobaccotaxes AT fuchsalan evidencefromsouthafrica AT delcarmengiselle evidencefromsouthafrica AT mukonalfredkechia evidencefromsouthafrica |
| _version_ |
1807156663888642048 |