Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia

This study uses aggregate times series data (annual data from 1970-2001) and monthly data from January 1996 to June 2001 to estimate the price and income elasticity of demand for tobacco products in Indonesia. Using various model specifications use...

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Main Authors:	Djutaharta, Triasih, Viriya Surya, Henry, Pasay, N. Haidy A., Hendratno, Adioetomo, Sri Moertiningsih
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	ADOLESCENTS ADULTS ADVERTISING AGED AGGREGATE ANALYSIS AGGREGATE DEMAND ALCOHOL ASTHMA BURDEN OF DISEASE CARBON CITIES CONSUMER PRICE INDEX CONSUMERS DAMAGES DISEASE CONTROL DISEASES ECONOMIC IMPACT ELASTICITY EPIDEMIOLOGY EXCISE TAXES EXPENDITURES EXPORTS FORESTRY GDP GDP DEFLATOR GDP PER CAPITA GNP GOVERNMENT REGULATION GOVERNMENT REGULATIONS GROSS NATIONAL PRODUCT HIS/HER HOSPITALS HUMAN DEVELOPMENT IMPORTS IMPOTENCE INCOME INCOME ELASTICITY OF DEMAND INFERTILITY INTERVENTION LUNG CANCER MARKET FACTORS MEDIA NATIONAL INCOME NUTRITION PARTNERSHIP PASSIVE SMOKING PER CAPITA INCOME POLICY MAKERS PREGNANCY PREMATURE DEATH PRICE CHANGES PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASES PRODUCERS PUBLIC HEALTH PURCHASING POWER REAL GDP REAL INCOME REPRODUCTIVE HEALTH SCHOOLS SMOKERS SMOKING STD TAX TAX REVENUE TAX REVENUES TAXATION TELECOMMUNICATIONS TIME SERIES TOBACCO TOBACCO CONTROL TOBACCO USE TOTAL REVENUE UTILITY MAXIMIZATION
Online Access:	http://documents.worldbank.org/curated/en/2005/01/5701718/aggregate-analysis-impact-cigarette-tax-rate-increases-tobacco-consumption-government-revenue-case-indonesia http://hdl.handle.net/10986/13758

id	okr-10986-13758
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spelling	okr-10986-137582021-04-23T14:03:09Z Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia Djutaharta, Triasih Viriya Surya, Henry Pasay, N. Haidy A. Hendratno Adioetomo, Sri Moertiningsih ADOLESCENTS ADULTS ADVERTISING AGED AGGREGATE ANALYSIS AGGREGATE DEMAND ALCOHOL ASTHMA BURDEN OF DISEASE CARBON CITIES CONSUMER PRICE INDEX CONSUMERS DAMAGES DISEASE CONTROL DISEASES ECONOMIC IMPACT ELASTICITY EPIDEMIOLOGY EXCISE TAXES EXPENDITURES EXPORTS FORESTRY GDP GDP DEFLATOR GDP PER CAPITA GNP GOVERNMENT REGULATION GOVERNMENT REGULATIONS GROSS NATIONAL PRODUCT HIS/HER HOSPITALS HUMAN DEVELOPMENT IMPORTS IMPOTENCE INCOME INCOME ELASTICITY OF DEMAND INFERTILITY INTERVENTION LUNG CANCER MARKET FACTORS MEDIA NATIONAL INCOME NUTRITION PARTNERSHIP PASSIVE SMOKING PER CAPITA INCOME POLICY MAKERS PREGNANCY PREMATURE DEATH PRICE CHANGES PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASES PRODUCERS PUBLIC HEALTH PURCHASING POWER REAL GDP REAL INCOME REPRODUCTIVE HEALTH SCHOOLS SMOKERS SMOKING STD TAX TAX REVENUE TAX REVENUES TAXATION TELECOMMUNICATIONS TIME SERIES TOBACCO TOBACCO CONTROL TOBACCO USE TOTAL REVENUE UTILITY MAXIMIZATION This study uses aggregate times series data (annual data from 1970-2001) and monthly data from January 1996 to June 2001 to estimate the price and income elasticity of demand for tobacco products in Indonesia. Using various model specifications used in the cigarette demand literature, and then selecting the best model, it estimates the real price elasticity of cigarette demand as -0.345 and income elasticity of demand as 0.473. This inplies that a 10 percent real price increase would reduce consumption by 3.4 percent, and a 10 percent real income increase would raise consumption by 4.7 percent. The economic crisis after 1997 was found to increase consumption, over and above the effects of price and income, and the warning label on cigarette packs required after 1991 appears to have no significant impact on demand. Estimates based on the shorter period of monthly data showed less responsiveness to price and incomes, as would be expected. The study simulates the effects of a tax increase on total tobacco excise revenues and predicts that an increase in the tax level of 10, 50, or 100 percent would increase total tax revenue by 9 percent, 43 percent, and 82 percent respectively. The study comments on the effect of possible switching to cheaper products or illegal purchases. 2013-06-04T21:19:32Z 2013-06-04T21:19:32Z 2005-01 http://documents.worldbank.org/curated/en/2005/01/5701718/aggregate-analysis-impact-cigarette-tax-rate-increases-tobacco-consumption-government-revenue-case-indonesia http://hdl.handle.net/10986/13758 English en_US Health, Nutrition and Population (HNP) discussion paper; CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research :: Working Paper Publications & Research East Asia and Pacific Indonesia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ADOLESCENTS ADULTS ADVERTISING AGED AGGREGATE ANALYSIS AGGREGATE DEMAND ALCOHOL ASTHMA BURDEN OF DISEASE CARBON CITIES CONSUMER PRICE INDEX CONSUMERS DAMAGES DISEASE CONTROL DISEASES ECONOMIC IMPACT ELASTICITY EPIDEMIOLOGY EXCISE TAXES EXPENDITURES EXPORTS FORESTRY GDP GDP DEFLATOR GDP PER CAPITA GNP GOVERNMENT REGULATION GOVERNMENT REGULATIONS GROSS NATIONAL PRODUCT HIS/HER HOSPITALS HUMAN DEVELOPMENT IMPORTS IMPOTENCE INCOME INCOME ELASTICITY OF DEMAND INFERTILITY INTERVENTION LUNG CANCER MARKET FACTORS MEDIA NATIONAL INCOME NUTRITION PARTNERSHIP PASSIVE SMOKING PER CAPITA INCOME POLICY MAKERS PREGNANCY PREMATURE DEATH PRICE CHANGES PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASES PRODUCERS PUBLIC HEALTH PURCHASING POWER REAL GDP REAL INCOME REPRODUCTIVE HEALTH SCHOOLS SMOKERS SMOKING STD TAX TAX REVENUE TAX REVENUES TAXATION TELECOMMUNICATIONS TIME SERIES TOBACCO TOBACCO CONTROL TOBACCO USE TOTAL REVENUE UTILITY MAXIMIZATION
spellingShingle	ADOLESCENTS ADULTS ADVERTISING AGED AGGREGATE ANALYSIS AGGREGATE DEMAND ALCOHOL ASTHMA BURDEN OF DISEASE CARBON CITIES CONSUMER PRICE INDEX CONSUMERS DAMAGES DISEASE CONTROL DISEASES ECONOMIC IMPACT ELASTICITY EPIDEMIOLOGY EXCISE TAXES EXPENDITURES EXPORTS FORESTRY GDP GDP DEFLATOR GDP PER CAPITA GNP GOVERNMENT REGULATION GOVERNMENT REGULATIONS GROSS NATIONAL PRODUCT HIS/HER HOSPITALS HUMAN DEVELOPMENT IMPORTS IMPOTENCE INCOME INCOME ELASTICITY OF DEMAND INFERTILITY INTERVENTION LUNG CANCER MARKET FACTORS MEDIA NATIONAL INCOME NUTRITION PARTNERSHIP PASSIVE SMOKING PER CAPITA INCOME POLICY MAKERS PREGNANCY PREMATURE DEATH PRICE CHANGES PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASES PRODUCERS PUBLIC HEALTH PURCHASING POWER REAL GDP REAL INCOME REPRODUCTIVE HEALTH SCHOOLS SMOKERS SMOKING STD TAX TAX REVENUE TAX REVENUES TAXATION TELECOMMUNICATIONS TIME SERIES TOBACCO TOBACCO CONTROL TOBACCO USE TOTAL REVENUE UTILITY MAXIMIZATION Djutaharta, Triasih Viriya Surya, Henry Pasay, N. Haidy A. Hendratno Adioetomo, Sri Moertiningsih Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia
geographic_facet	East Asia and Pacific Indonesia
relation	Health, Nutrition and Population (HNP) discussion paper;
description	This study uses aggregate times series data (annual data from 1970-2001) and monthly data from January 1996 to June 2001 to estimate the price and income elasticity of demand for tobacco products in Indonesia. Using various model specifications used in the cigarette demand literature, and then selecting the best model, it estimates the real price elasticity of cigarette demand as -0.345 and income elasticity of demand as 0.473. This inplies that a 10 percent real price increase would reduce consumption by 3.4 percent, and a 10 percent real income increase would raise consumption by 4.7 percent. The economic crisis after 1997 was found to increase consumption, over and above the effects of price and income, and the warning label on cigarette packs required after 1991 appears to have no significant impact on demand. Estimates based on the shorter period of monthly data showed less responsiveness to price and incomes, as would be expected. The study simulates the effects of a tax increase on total tobacco excise revenues and predicts that an increase in the tax level of 10, 50, or 100 percent would increase total tax revenue by 9 percent, 43 percent, and 82 percent respectively. The study comments on the effect of possible switching to cheaper products or illegal purchases.
format	Publications & Research :: Working Paper
author	Djutaharta, Triasih Viriya Surya, Henry Pasay, N. Haidy A. Hendratno Adioetomo, Sri Moertiningsih
author_facet	Djutaharta, Triasih Viriya Surya, Henry Pasay, N. Haidy A. Hendratno Adioetomo, Sri Moertiningsih
author_sort	Djutaharta, Triasih
title	Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia
title_short	Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia
title_full	Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia
title_fullStr	Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia
title_full_unstemmed	Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia
title_sort	aggregate analysis of the impact of cigarette tax rate increases on tobacco consumption and government revenue : the case of indonesia
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2005/01/5701718/aggregate-analysis-impact-cigarette-tax-rate-increases-tobacco-consumption-government-revenue-case-indonesia http://hdl.handle.net/10986/13758
_version_	1764424086987997184

Aggregate Analysis of the Impact of Cigarette Tax Rate Increases on Tobacco Consumption and Government Revenue : The Case of Indonesia

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