Implications of Increasing Cigarette Taxes in Peru

Martin Gonzalez-Rozada and Alejandro Ramos-Carbajales

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: This paper aims to assess the impact of raising cigarette taxes in Peru on cigarette consumption and if this increment in taxes is regressive. Methods. We estimate total demand price elasticity and by income groups using two datasets, quarterly data and data from a cross-sectional survey of income and expenses. We specify a functional form of the demand for cigarettes in Peru using the quarterly data set and estimate the demand price elasticity for the short and long run. Using the second data set and based on Deaton methodology, the implementation of elasticity estimation and by groups’ elasticity was done in a two-step procedure. Results. Demand price elasticity is -0.7 implying that increasing prices by 10%, via taxes, induce a reduction of consumption of 7%. Demand price elasticity estimations by income groups suggest that poorer families are not more price sensitive than richer ones implying that increasing cigarette taxes could be regressive. Conclusions. Increasing cigarette taxes is the most efficient policy to induce a reduction in smoking. However, in the case of Peru, this increment in cigarette taxes could be regressive.

Keywords: Peru; Taxation of the Tobacco-Derived Products; Consumption of TobaccoDerived Products; Statistics & Numerical Data; Economics (search for similar items in EconPapers)
Pages: 16 pages
Date: 2016-02
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.utdt.edu/download.php?fname=_146159351015436000.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2016_02

Access Statistics for this paper

More papers in Department of Economics Working Papers from Universidad Torcuato Di Tella Contact information at EDIRC.
Bibliographic data for series maintained by María Cecilia Lafuente ().