Tobacco Price Elasticity and Tax Progressivity in Moldova
Tobacco-use–related diseases are the main cause of mortality in Moldova, where tobacco consumption is widely spread, especially among men. In addition to health concerns, tobacco consumption has economic consequences, as households spend substantia...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/139091517503854559/Tobacco-price-elasticity-and-tax-progressivity-in-Moldova http://hdl.handle.net/10986/29315 |
| Summary: | Tobacco-use–related diseases are the
main cause of mortality in Moldova, where tobacco
consumption is widely spread, especially among men. In
addition to health concerns, tobacco consumption has
economic consequences, as households spend substantial
resources on tobacco and related out-of-pocket medical
costs. Tobacco tax increases are one of the most effective
measures to reduce tobacco consumption, but are usually
believed to be regressive, taxing the poor proportionally
more than the rich. This paper estimates the tobacco price
elasticity of demand for Moldova by income decile and
undertakes an extended cost-benefit analysis to estimate the
distributional effect of a rise in tobacco taxes on income
distribution. The paper's main findings are that a
tobacco price increase would generate a rise in expenditure
deriving from direct tobacco price increases, but would
reduce the costs of out-of-pocket medical expenses. Based on
these two factors, the net effect of a tobacco tax increase
would be progressive in the analyzed cases, ultimately
benefitting the incomes of the lower-income groups in the population. |
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