The Distributional Impacts of Cigarette Taxation in Bangladesh

Giselle Eugenia Del Carmen Hasbun, Alan Fuchs Tarlovsky and Maria Eugenia Genoni

No 8580, Policy Research Working Paper Series from The World Bank

Abstract: Despite the obvious positive health impacts of tobacco taxation, an argument raised against it is that poor households bear the burden of the increased prices because of their higher share of spending on tobacco. This note includes estimates of the distributional impacts of price rises on cigarettes under various scenarios using the Household Income and Expenditure Survey 2016/17. One contribution of this analysis is to quantify the impacts by allowing price elasticities to vary across consumption deciles. This shows that an increase in the price of cigarettes in Bangladesh has small consumption impacts and does not significantly change the poverty rate or consumption inequality. These findings stem from relatively even cigarette consumption patterns between less and more well-off households. These results hold even considering some small substitution through the use of bidis, which are largely consumed by the poor. The short-term consumption impacts are also negligible compared with the estimated gains because of savings in medical costs and the greater number of productive years of life.

Keywords: Health Care Services Industry; Public Health Promotion; Disease Control&Prevention; Inequality; Tobacco Use and Control; Public Sector Economics; Taxation&Subsidies; Public Finance Decentralization and Poverty Reduction; Macro-Fiscal Policy; Economic Adjustment and Lending (search for similar items in EconPapers)
Date: 2018-09-12
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Citations: View citations in EconPapers (1)

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