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Differential price responses for tobacco consumption: implications for tax incidence

Cruces, Guillermo; Falcone, Guillermo; Puig, Jorge

Differential price responses for tobacco consumption: implications for tax incidence Thumbnail


Guillermo Falcone

Jorge Puig


Increasing tobacco taxes is considered the most effective an cost-effective policy to reduce tobacco consumption. However, a common objection to tobacco taxes is that they tend to rely disproportionately on the poorest individuals since less affluent smokers incur proportionately greater expenditures on cigarettes compared with more affluent smokers. Such objections usually assume that all smokers throughout the income distribution react similarly to an increase in tobacco prices. But, if less affluent smokers are more sensitive to price changes (ie, they have a higher demand price elasticity), reductions in tobacco consumption should be higher at the bottom of the income distribution. This paper uses data from Argentina’s Household Expenditure Survey to estimate demand price elasticities for tobacco by income and age groups. Results indicate that less affluent smokers present higher demand price elasticities for cigarettes than more affluent ones. A 10% increase in cigarette prices would decrease consumption by 8.5% (4.4%) for the poorest (richest) smokers. In addition, young people are the most elastic group. These differential elasticities have relevant implications in terms of the distributional incidence of increasing tobacco taxes. As less well-off individuals reduce consumption relatively more, they bear a relatively lower tax burden. Thus, tobacco tax increases may not be regressive as is often believed. As a whole, this paper provides policymakers with relevant arguments for policy discussion and the public debate on common objections to increasing tobacco taxes.


Cruces, G., Falcone, G., & Puig, J. (2022). Differential price responses for tobacco consumption: implications for tax incidence. Tobacco Control, 31(Suppl 2), s95-s100.

Journal Article Type Article
Acceptance Date Dec 11, 2021
Online Publication Date Jan 11, 2022
Publication Date Jan 1, 2022
Deposit Date Feb 9, 2023
Publicly Available Date Feb 9, 2023
Journal Tobacco Control
Print ISSN 0964-4563
Electronic ISSN 1468-3318
Publisher BMJ
Peer Reviewed Peer Reviewed
Volume 31
Issue Suppl 2
Pages s95-s100
Keywords Public Health, Environmental and Occupational Health; Health (social science)
Public URL
Publisher URL


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