Quantity, quality, and regional price variation of cigarettes: Demand analysis based on a household survey in China

Yuyu Chen and Weibo Xing ()

China Economic Review, 2011, vol. 22, issue 2, 221-232

Abstract: This paper investigates the price elasticity of cigarettes using an urban household survey in China. We find that cigarette price is an important determinant of smoking. In our two-part model, the overall price elasticity is -Â 0.82. Nevertheless, tobacco demand is influenced by both price and quality. We net out the quality effect of tobacco demand to obtain standard price elasticities, which are between -Â 0.70 and -Â 0.35. In addition, when we estimate two demand systems of Chinese households, the estimated own-price elasticities of cigarettes are -Â 0.57 and -Â 0.81. These elasticities suggest that if the tobacco excise tax rate goes up, cigarette consumption will drop rapidly, and government revenue from the tobacco tax will increase.

Keywords: Cigarette; consumption; Unit; value; Deaton; model; Demand; system; Tobacco; taxation (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:22:y:2011:i:2:p:221-232

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