Quantity, Quality, and Regional Price Variation of Cigarettes: Demand Analysis Based on a Household Survey in China

Yuyu Chen and Weibo Xing ()

Chapter 5 in Economics of Tobacco Control in China:From Policy Research to Practice, 2016, pp 61-87 from World Scientific Publishing Co. Pte. Ltd.

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 −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 −0.70 and −0.35. In addition, when we estimate two demand systems of Chinese households, the estimated own-price elasticities of cigarettes are −0.57 and −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: China; Health Economics; Tobacco Control; Public Health; Smoking; WHO; Taxation; Tobacco Tax (search for similar items in EconPapers)
Date: 2016
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Journal Article: Quantity, quality, and regional price variation of cigarettes: Demand analysis based on a household survey in China (2011)
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