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

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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Bibliographic Details
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
Description
Summary: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.

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