The Distributional Effects of Tobacco Taxation : The Evidence of White and Clove Cigarettes in Indonesia
Despite the well-known positive impact of tobacco taxes on health outcomes, policy makers hesitate to use them because of their possible regressive effect, that is, poorer deciles are proportionally more negatively affected than richer ones. Using...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/947511534513877197/The-distributional-effects-of-tobacco-taxation-the-evidence-of-white-and-clove-cigarettes-in-Indonesia http://hdl.handle.net/10986/30285 |
| Summary: | Despite the well-known positive impact
of tobacco taxes on health outcomes, policy makers hesitate
to use them because of their possible regressive effect,
that is, poorer deciles are proportionally more negatively
affected than richer ones. Using an extended cost-benefit
analysis to estimate the distributional effect of white and
clove cigarettes in Indonesia, this study finds that the
long-run impact may be progressive. The final aggregate
effect incorporates the negative price effect, but also
changes in medical expenditures and additional working
years. The analysis includes estimates of the distributional
impacts of price rises on cigarettes under various scenarios
using 2015–16 Indonesia National Socioeconomic Surveys. One
contribution is to quantify the impacts by allowing price
elasticities to vary across consumption deciles. Overall,
clove cigarette taxes exert an effect that depends on the
assumptions of conditional price elasticity. If the
population is more responsive to tobacco price changes, then
people would experience even more gains from the health and
work benefits. More research is needed to clarify the
distributional effects of tobacco taxation in Indonesia. |
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