Distributional Effects of Tobacco Taxation : A Comparative Analysis
Tobacco taxes have positive impacts on health outcomes. However, policy makers often hesitate to use them because of the perception that poorer households are affected disproportionally more than richer households. This study compares the simulated...
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/899011554727317064/Distributional-Effects-of-Tobacco-Taxation-A-Comparative-Analysis http://hdl.handle.net/10986/31534 |
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okr-10986-315342022-09-19T12:16:51Z Distributional Effects of Tobacco Taxation : A Comparative Analysis Fuchs, Alan González Icaza, Fernanda Paz, Daniela TOBACCO CONTROL TAXATION TOBACCO TAX SIN TAX INCOME DISTRIBUTION DISTRIBUTIONAL IMPACT POVERTY CIGARETTE TAX Tobacco taxes have positive impacts on health outcomes. However, policy makers often hesitate to use them because of the perception that poorer households are affected disproportionally more than richer households. This study compares the simulated distributional effects of tobacco tax increases in eight low- and middle-income countries. It applies a standardized extended cost-benefit analysis methodology and relies on comparable data sources across countries. The net effect of raising taxes on cigarettes encompasses the direct negative price shock to household budgets and the long-term benefits of improved health outcomes. The distributional incidence is assessed by estimating decile-specific behavioral responses and relative income gains. The comparative results do not support the claim that tobacco taxes are necessarily regressive. Although welfare losses from the first-order price shock disproportionally affect the poor, these negative shocks are attenuated by greater price-responsiveness among lower-income groups and further offset by higher long-term relative gains through reduced medical expenditures and additional years of productive life as taxes dissuade smoking. In several countries, increasing the price of cigarettes is pro-poor and welfare improving for a large share of the population. Along with raising taxes, policy should aim at encouraging responsiveness to price changes and target tobacco-related medical expenses that disproportionally burden the poor. 2019-04-11T20:31:53Z 2019-04-11T20:31:53Z 2019-04 Working Paper http://documents.worldbank.org/curated/en/899011554727317064/Distributional-Effects-of-Tobacco-Taxation-A-Comparative-Analysis http://hdl.handle.net/10986/31534 English Policy Research Working Paper;No. 8805 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
TOBACCO CONTROL TAXATION TOBACCO TAX SIN TAX INCOME DISTRIBUTION DISTRIBUTIONAL IMPACT POVERTY CIGARETTE TAX |
| spellingShingle |
TOBACCO CONTROL TAXATION TOBACCO TAX SIN TAX INCOME DISTRIBUTION DISTRIBUTIONAL IMPACT POVERTY CIGARETTE TAX Fuchs, Alan González Icaza, Fernanda Paz, Daniela Distributional Effects of Tobacco Taxation : A Comparative Analysis |
| relation |
Policy Research Working Paper;No. 8805 |
| description |
Tobacco taxes have positive impacts on
health outcomes. However, policy makers often hesitate to
use them because of the perception that poorer households
are affected disproportionally more than richer households.
This study compares the simulated distributional effects of
tobacco tax increases in eight low- and middle-income
countries. It applies a standardized extended cost-benefit
analysis methodology and relies on comparable data sources
across countries. The net effect of raising taxes on
cigarettes encompasses the direct negative price shock to
household budgets and the long-term benefits of improved
health outcomes. The distributional incidence is assessed by
estimating decile-specific behavioral responses and relative
income gains. The comparative results do not support the
claim that tobacco taxes are necessarily regressive.
Although welfare losses from the first-order price shock
disproportionally affect the poor, these negative shocks are
attenuated by greater price-responsiveness among
lower-income groups and further offset by higher long-term
relative gains through reduced medical expenditures and
additional years of productive life as taxes dissuade
smoking. In several countries, increasing the price of
cigarettes is pro-poor and welfare improving for a large
share of the population. Along with raising taxes, policy
should aim at encouraging responsiveness to price changes
and target tobacco-related medical expenses that
disproportionally burden the poor. |
| format |
Working Paper |
| author |
Fuchs, Alan González Icaza, Fernanda Paz, Daniela |
| author_facet |
Fuchs, Alan González Icaza, Fernanda Paz, Daniela |
| author_sort |
Fuchs, Alan |
| title |
Distributional Effects of Tobacco Taxation : A Comparative Analysis |
| title_short |
Distributional Effects of Tobacco Taxation : A Comparative Analysis |
| title_full |
Distributional Effects of Tobacco Taxation : A Comparative Analysis |
| title_fullStr |
Distributional Effects of Tobacco Taxation : A Comparative Analysis |
| title_full_unstemmed |
Distributional Effects of Tobacco Taxation : A Comparative Analysis |
| title_sort |
distributional effects of tobacco taxation : a comparative analysis |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/899011554727317064/Distributional-Effects-of-Tobacco-Taxation-A-Comparative-Analysis http://hdl.handle.net/10986/31534 |
| _version_ |
1764474543716433920 |