Time to Quit
This paper uses an extended cost-benefit analysis to estimate the distributional effect of tobacco tax increases in Bosnia and Herzegovina. The analysis considers the effect on household income of an increase in tobacco prices, changes in medical expenses, and the prolongation of working years under various scenarios, based on data in three waves of the national Household Budget Survey. One critical contribution is a quantification of the impacts by allowing price elasticities to vary across consumption deciles. The results indicate that a rise in tobacco prices generates positive income variations across the lowest income groups in the population (the bottom 20 percent). At the same time, tobacco price increases have negative income effects among middle-income and upper-income groups. These effects are larger, the higher the income level. If benefits through lower medical expenses and an expansion in working years are considered, the positive effect is acerbated among the lowest income groups. The middle of the distribution sees the income effect turn from negative to positive, and the top 40 percent, although continuing to experience a negative effect, see the magnitude of this effect diminish. Altogether, these effects mean that increases in tobacco prices have a pro-poor, progressive effect in Bosnia and Herzegovina. These results also hold within entities and across urban and rural areas.
| Main Authors: | , , |
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| Format: | Report biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019-01
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| Subjects: | TOBACCO CONTROL, TOBACCO CONSUMPTION, TOBACCO TAX, PRICE ELASTICITY, WELFARE IMPACT, INEQUALITY, POVERTY, MEDICAL EXPENSES, LIFESPAN, LIFE EXPECTANCY, DISTRIBUTIONAL IMPACT, |
| Online Access: | http://documents.worldbank.org/curated/en/566331548174814908/Time-to-Quit-The-Tobacco-Tax-Increase-and-Household-Welfare-in-Bosnia-and-Herzegovina https://hdl.handle.net/10986/31249 |
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| Summary: | This paper uses an extended cost-benefit
analysis to estimate the distributional effect of tobacco
tax increases in Bosnia and Herzegovina. The analysis
considers the effect on household income of an increase in
tobacco prices, changes in medical expenses, and the
prolongation of working years under various scenarios, based
on data in three waves of the national Household Budget
Survey. One critical contribution is a quantification of the
impacts by allowing price elasticities to vary across
consumption deciles. The results indicate that a rise in
tobacco prices generates positive income variations across
the lowest income groups in the population (the bottom 20
percent). At the same time, tobacco price increases have
negative income effects among middle-income and upper-income
groups. These effects are larger, the higher the income
level. If benefits through lower medical expenses and an
expansion in working years are considered, the positive
effect is acerbated among the lowest income groups. The
middle of the distribution sees the income effect turn from
negative to positive, and the top 40 percent, although
continuing to experience a negative effect, see the
magnitude of this effect diminish. Altogether, these effects
mean that increases in tobacco prices have a pro-poor,
progressive effect in Bosnia and Herzegovina. These results
also hold within entities and across urban and rural areas. |
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