Advertising media and cigarette demand

Using state-level panel data for the USA spanning three decades, this research estimates the demand for cigarettes. The main contribution lies in studying the effects of cigarette advertising disaggregated across five qualitatively different groups. Results show cigarette demand to be near unit elastic, the income effects to be generally insignificant and border price effects and habit effects to be significant. Regarding advertising effects, aggregate cigarette advertising has a negative effect on smoking. Important differences across advertising media emerge when cigarette advertising is disaggregated. The effects of public entertainment and Internet cigarette advertising are stronger than those of other media. Anti-smoking messages accompanying print cigarette advertising seem relatively more effective. Implications for smoking control policy are discussed.     

Economic stress and cigarette smoking: Evidence from the United States

This paper uses pooled data on U.S. states for the post-MSA period to estimate the demand for cigarettes, with the main contribution lying in considering the effects of economic stress/uncertainty. Different measures of economic stress – standard deviations and averages of unemployment and property prices – are considered. Greater economic stress is found to lower cigarette smoking across various specifications. Other findings largely support the literature on cigarette demand — price effects are negative, border price effects are positive and the effect of income is negative.     

Unemployment,insurance and smoking

Using recent state-level data from the United States, this article examines new influences on cigarette demand. In particular, we uniquely focus on the effects of unemployment and health insurance coverage on smoking. Results show that higher cigarette prices, a lack of health insurance and restrictions on smoking at home, all lead to reduced smoking. On the other hand, literacy, income, unemployment, workplace smoking restrictions, smokeless tobacco taxes and tobacco-producing states do not seem to have an appreciable impact. The magnitude of the price elasticity of demand is greater than that found in the pre-MSA era. Policy implications are discussed.     

Demand for cigarettes in Turkey: an application of count data models

Household cigarette demand in Turkey is examined using the zero-inflated negative binomial model to account for a large portion of households not reporting cigarette smoking or purchase and estimated using the data from the national household survey implemented in 2003. Data were divided into two main groups: families with and without teenagers. Results identify relevant household head and household characteristics needed to develop effective public policy to prevent the decision to begin to smoke and to reduce cigarette purchase to lower the future growth of government healthcare expenditures. Specifically, healthcare expenditure share, income, and cigarette-price elasticities are relevant in lowering cigarette purchases. The calculated price elasticities for cigarette demand falls within the range determined by studies conducted for developed countries including the member states of the European Union. An estimate of the effect of an increase in the excise tax lowering demand is provided.     

Factors Affecting Cigarette Demand

This paper addresses the impact of smoking restrictions in workplaces and educational establishments, cigarette price measures and various psychosocial indicators on cigarette demand, controlling for demographic and socio-economic factors. The data used for the analysis are collected via questionnaire that was administered in personal-in home interviews. A two-part model of cigarette demand [Cragg, J. G. “Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods,” Econometrica, 39, 5, 1971, pp. 829–44.] is estimated. According to the estimations, cigarette price measures do not influence cigarette demand. On the contrary, smoking restrictions in workplaces and educational establishments and most of the psychosocial variables are found to affect cigarette demand considerably.     

Advertising and Restrictions in the Cigarette Industry: Evidence of State-by-State Variation

Many studies estimate the relationship between advertising and consumption in the cigarette industry, with emphasis directed toward the national demand for cigarettes. However, in light of evidence that cigarette producers price discriminate across U.S. states, coupled with possible affects of advertising on market power, this article takes a less aggregate perspective by addressing the role of cigarette advertising and restrictions at the state level. The results show that although advertising has little effect on demand, it generally increases market power in the cigarette industry (particularly during periods of heightened advertising restrictions). Furthermore, the relationship between advertising, demand, and supply vary across states. (JEL L13 , L66 , I18 )     

CLEAN INDOOR AIR LAWS AND THE DEMAND FOR CIGARETTES

This paper empirically tests the effect of clean indoor air laws on smoking. Public place clean indoor air laws restrict cigarette smoking in public places such as restaurants. Private place clean air laws regulate smoking in private work places as well as in public places. This study uses a time series of cross sections of the 50 states of the United States and Washington, D.C., from 1975 through 1985, to estimate single equation and simultaneous equation models of cigarette demand. The single equation results indicate that both the public place law and the private work place law have a negative effect on cigarette demand. However, a test for endogeneity shows that the enactment of clean indoor air laws is a function of cigarette demand. Results from a simultaneous equations model indicate that the public place law has a significant negative impact on cigarette demand, while the work place law has no effect on cigarette demand. Although these results demonstrate that only states with low levels of smoking have passed work place clean air laws, the results do not imply that the level of smoking would not decrease if such a law were imposed in all states.     

Aggregate cigarette demand and regional differences in China

National educational level, final consumption expenditure, average propensity to cigarette consumption (APCC) and cigarette price are adopted to research the regional and national aggregate cigarette demand of China. Under the condition that the effects of anti-smoking education in the Chinese current educational system are not remarkable, the theoretical model shows that cigarette demand will increase with the increase of national educational level. Empirical analysis points out that cigarette demand increases with the increase of educational level. Estimates also suggest that cigarette price, consumption expenditure and APCC will affect cigarette demand significantly, and that there are great differences for cigarette demand by region.     

THE DEMAND FOR CIGARETTES IN JAPAN: IMPACT OF INFORMATION DISSEMINATION ON CIGARETTE CONSUMPTION

The authors present a theoretical derivation of cigarette demand and estimate the demand in Japan with prefecturE-level data. By examining the impact of information dissemination regarding the health hazards of smoking, the authors argue that information dissemination is an effective instrument of public health policy, supplementary to cigarette taxation and antismoking ordinances.     

Is there the threshold effect of cigarette price on smoking prevalence? A cross-country panel data analysis

This article shows new cross-country evidences by empirically investigating the joint effects of cigarette price levels and joining the World Health Organization Framework Convention on Tobacco Control (WHO FCTC) on smoking prevalence in 74 countries over the period of 2000, 2003, 2005 and 2006. We assessed cigarette price elasticity for three national income levels using different databases on cigarette price from the Economist Intelligence Unit (EIU), demographic and socioeconomic country characteristics from the World Bank and adjusted smoking prevalence rates published by various yearly WHO reports on the global tobacco epidemic from 2000 to 2010. A panel threshold regression was used to capture the nonlinear effects that cigarette prices on smoking prevalence at the three national income levels endogenously determined by estimation. Our findings supported the evidence that joining the WHO FCTC would have a positive effect on reducing cross-country smoking prevalence, especially among countries with low- and medium-income levels. Moreover, some simulated results show that a price hike of 10% would reduce smoking prevalence in countries with national income levels equal to or less than US$1900 and by 7.2% in countries with national income levels between US$1900 and US$2510 more than those with national income levels that are higher than US$2510.     

Demand for cigarettes in the United States: effects of prices in bordering states and contiguity with Mexico and Canada

Based on a cross-section of US states for 2004, this article estimates a demand function for cigarettes after including a proxy for prices in the bordering states and simple proxies for contiguity with Mexico and Canada and for being a major tobacco producer. One major point seems to be that the negative elasticity for within-state price is similar in magnitude to the positive elasticity for the (lowest) price in bordering states. Several additional points also seem noteworthy. First, having a border with Mexico lowers sales in the state sizably. Second, the share of Hispanic/Latino population in the state also lowers sales significantly. Third, contiguity with Canada appears to have no significant effect. Fourth, partial impact of the state being a major tobacco producer appears minor even though consumption in these states is considerably higher. Fifth, education shows the expected negative association with cigarette consumption, but its statistical significance is low. Last, income carries a weak negative parameter, perhaps reflecting the lower prevalence of smoking in higher-income households.     

The US National Tobacco Settlement: the effects of advertising and price changes on cigarette consumption

This paper provides an econometric analysis of the effects of cigarette price and advertising changes stemming from the United States Tobacco Settlement of 1998. This is done by estimation of a demand function for cigarettes, based on data from both before and after the Settlement. The model is estimated using monthly time series data for the period 1990–2000. Results show that the increase in cigarette prices stemming from the Settlement reduced per capita cigarette consumption in the USA by 8.3%. However, the cigarette companies also increased advertising in the years immediately preceding and following the Settlement. This study estimates that this increased advertising partially offsets the effects of the higher prices, increasing cigarette consumption by 2.7 to 4.7%, and hence blunting the effects of the price increase by 33–57%.     

Demand Shift across US Industries and the Stabilizing Function of Nominal Wage and Price Flexibility.

Nominal wage and price adjustments in response to demand shocks are likely to determine industrial output variability. The direction of this relationship is complicated, however, by demand and supply factors. The empirical investigation across a sample of private industries in the United States produces the following evidence. Price flexibility moderates the response of the output supplied to a given shift in industrial demand. Similarly, nominal wage flexibility moderates, although insignificantly, the output response to a given shift in industrial demand. The size of industrial demand shifts dominates, however, supply-side constraints in differentiating output fluctuations across industries. While price flexibility moderates shifts in industrial demand in response to aggregate demand shocks, these shifts are larger the higher the nominal wage flexibility across industries. The combined supply and demand effects differentiate the stabilizing function of nominal wage and price flexibility. Nominal wage flexibility increases output fluctuations in response to aggregate demand shocks. In contrast, output fluctuations are smaller the larger the price adjustment to demand shocks across industries. Given the endogeneity of price flexibility, it is necessary to control for variation in demand variability in order to reveal the stabilizing effect of price flexibility on output across industries.     

Estimating Telephone Demand with State Decennial Census Data from 1970–1990

A telephone demand model (logit) is estimated with pooled Decennial Census data (1970, 1980 and 1990) for the states. Previous studies using pooled FCC penetration data are suspect due to large standard errors in the sample. Since our model includes data across time this allows the inclusion of long distance price and increases the variation in the standard variables. Time-effect dummy variables control for unobserved shifts in the data. Given that these dummy variables may pick up some of the effect of the long distance price, as well as other unobserved effects, their estimated impact is relatively small. Robust model results lead to the conclusion that elasticities decline through time. Furthermore, while subsidized penetration is more effective for targeted than untargeted programs, the cost per year of adding a household to the network is very high in either case (for 1990 about $5368 for untargeted; and for targeted $191 in 1990 and $1581 in 1998).     

New Evidence on Youth Smoking Behavior based on Experimental Price Increases

The high youth smoking prevalence remains an important public policy challenge into the 21st century. This study applies a unique approach to analyzing the impact of cigarette prices on youth smoking cessation by evaluating reactions among high school students to several alternative hypothetical price increases. It concludes that many young smokers believe that they would quit smoking or decrease their smoking intensity in response to a cigarette price increase. The estimated price elasticity of cessation is between 0.930 and 0.895. The results indicate that youth expect to change their smoking behavior even when the price change is relatively small. However, the behavioral change is most dramatic among those exposed to the largest price increases, suggesting a sustained impact of higher price on cigarette consumption. (JEL I18 )     

CIGARETTE TAXATION AND DEMAND: AN EMPIRICAL MODEL

This paper evaluates the impact of taxation on cigarette consumption, using a recursive model that includes a retail price equation and a dynamic demand equation. The analysis is based on panel data for 11 western states over the period 1967–1990. Results indicate that cigarette consumption is price-sensitive, with a demand elasticity of –0.40 in the short run and –0.48 in the long run. A tax increase, such as that imposed in California in January 1989, can have a strong effect of reducing cigarette consumption by between 11.2 percent in the short run and 13.4 percent in the long run. These results support the theory of rational addiction and the hypothesis that, as a part of their oligopoly behavior, the tobacco companies often do raise end-market prices by more than the amount of the increase in tax rates .     

A (nearly) global look at the dynamics of youth smoking initiation and cessation: the role of cigarette prices

This study investigates the role of cigarette prices on smoking initiation and cessation among youth in a sample of eight primarily non-Western low, middle, and high income countries, with a particular focus on a subsample of 40 low- and middle-income countries (LMICs). Using split-population duration models on longitudinally-transformed individual data from the Global Youth Tobacco Survey (GYTS), the average impact of cigarette prices in the presence of unobserved country heterogeneity and shifting cultural norms within countries is identified by the variation of cigarette prices within countries over time. Price increases are found to effectively reduce initiation in early youth, and girls are considerably more responsive than boys. The price elasticity of initiation in LMICs is ?0.82 for the combined gender analysis, ?0.46 for boys only and ?1.5 for girls only. There is some indication that youths in developing countries may be slightly less responsive to price changes than in high-income countries. No evidence is found that cigarette prices increase quitting rates in youth, which may be due to the difficulty of defining true quitting among smokers in early life.     

Heterogeneity and the evaluation of efficiency: the case of Italian universities

This study investigates the quarterly relationship between the quantity of cigarettes sold, real disposable income per capita, and the relative price level of cigarettes in Canada. Careful attention is paid to the nonstationarity of the data and the dynamic specification of the model. It is concluded that cigarette demand is extremely insensitive to price and income changes. This is evidence of the large consumer surplus smokers enjoy and the large revenue increasing potential of a cigarette tax increase policy, as opposed to cigarette bans.     

Cigarette and Tobacco Consumption: Have Anti-Smoking Policies Made a Difference?

The consumption of cigarette and tobacco products in Australia is modelled using the rational addiction theory of Becker and Murphy, augmented by data on advertising, regulatory intervention, and demographic factors. Over the past 35 years, price (including tobacco taxes), real income, and demographic effects explain most of the variation in tobacco consumption. Advertising by tobacco companies has had a relatively small direct effect on consumption. Work-place smoking bans and health warnings on cigarette packs have had a relatively minor impact, while anti-smoking advertising and bans on electronic media advertising have had no detectable direct effect.     

Smoke screen: Estimating the tax pass‐through to cigarette prices in Pakistan

This article estimates and compares the speed and magnitude of the tax pass‐through across major cigarette brands at different price points (budget, mainstream, and premium) in Pakistan by using a novel dataset of monthly observations on cigarette prices in 50 cities during the period 2004 to 2015. The empirical analysis indicates that the pass‐through of cigarette taxes to the final consumer price is fast but incomplete in Pakistan. The pass‐through coefficient is estimated to be in the range of 70 to over 90 percent across four major cigarette brands, and most of the pass‐through occurs contemporaneously within a period of 2 months. The results imply that a 1‐Pakistan rupee (PR ) increase in taxation leads to an increase of PR s 0.8, on average, in cigarette prices. In other words, cigarette taxes are undershifted to consumers in Pakistan. With respect to the tax pass‐through at different price tiers (budget, mainstream, and premium), I find significant variation in the pass‐through coefficient, which is close to one for the premium cigarette brand and significantly lower for the budget and mainstream cigarette brands.