The Distributional Effects of Tobacco Taxation
Despite the well-known positive impact of tobacco taxes on health outcomes, policy makers hesitate to use them because of their possible regressive effect, that is, poorer deciles are proportionally more negatively affected than richer ones. Using an extended cost-benefit analysis to estimate the distributional effect of white and clove cigarettes in Indonesia, this study finds that the long-run impact may be progressive. The final aggregate effect incorporates the negative price effect, but also changes in medical expenditures and additional working years. The analysis includes estimates of the distributional impacts of price rises on cigarettes under various scenarios using 2015–16 Indonesia National Socioeconomic Surveys. One contribution is to quantify the impacts by allowing price elasticities to vary across consumption deciles. Overall, clove cigarette taxes exert an effect that depends on the assumptions of conditional price elasticity. If the population is more responsive to tobacco price changes, then people would experience even more gains from the health and work benefits. More research is needed to clarify the distributional effects of tobacco taxation in Indonesia.
Main Authors: | , |
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Format: | Working Paper biblioteca |
Language: | English |
Published: |
World Bank, Washington, DC
2018-08
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Subjects: | TOBACCO TAX, DISTRIBUTIONAL IMPACT, INEQUALITY, REGRESSIVITY, CIGARETTE SMOKING, PRICE EFFECT, PRICE ELASTICITY, PVOERTY, TAXATION, EXCISE TAX, SIN TAX, CLOVE CIGARETTE, |
Online Access: | http://documents.worldbank.org/curated/en/947511534513877197/The-distributional-effects-of-tobacco-taxation-the-evidence-of-white-and-clove-cigarettes-in-Indonesia https://hdl.handle.net/10986/30285 |
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Summary: | Despite the well-known positive impact
of tobacco taxes on health outcomes, policy makers hesitate
to use them because of their possible regressive effect,
that is, poorer deciles are proportionally more negatively
affected than richer ones. Using an extended cost-benefit
analysis to estimate the distributional effect of white and
clove cigarettes in Indonesia, this study finds that the
long-run impact may be progressive. The final aggregate
effect incorporates the negative price effect, but also
changes in medical expenditures and additional working
years. The analysis includes estimates of the distributional
impacts of price rises on cigarettes under various scenarios
using 2015–16 Indonesia National Socioeconomic Surveys. One
contribution is to quantify the impacts by allowing price
elasticities to vary across consumption deciles. Overall,
clove cigarette taxes exert an effect that depends on the
assumptions of conditional price elasticity. If the
population is more responsive to tobacco price changes, then
people would experience even more gains from the health and
work benefits. More research is needed to clarify the
distributional effects of tobacco taxation in Indonesia. |
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