A cost-benefit analysis on Tobacco Control in China

There are more than 300 million smokers in China, nearly one-third of the world's total. According to WHO’s data, approximately one million deaths every year in China are caused by tobacco – around one in six of all such deaths worldwide and approximately 100,000 people die as a result of exposure to second-hand smoke each year. The smoking is becoming a huge threat to China’s public health. In 2016, The State Council of China issued an outline of the country's 2030 health plan. According to the outline, by 2030 the smoking rate of Chinese citizens above 15 years old should be reduced to 20 percent. Meanwhile the outline pointed out China will enhance tobacco control with the measures of price, tax and law. Although these market-based smoke-free policies will improve public health in the long run by decreasing cigarette consumption and reducing exposure to secondhand smoke, there exists debate/concern on the tobacco control in the short-term. The counterargument is tobacco control would bring about a reduction in not only employment in related sectors but also in tax revenues and economic growth. To respond to the debate and develop the most effective policy strategies, the government should make a trade-off between public health and economic development. In order to provide reference for policy decision, this study will do a cost-benefit analysis on tobacco control by constructing China’s computable general equilibrium model for tobacco policy. In this study, we will design different policy scenarios with different policy measures and targets. By doing simulation with CGE model, we will explores the direct costs: reduction on employment, tax revenue. We will also investigate the direct benefits: the saving of health insurance expense and health benefits. And more importantly, we will examine the indirect effects and aggregated/equilibrium effects on macro economy and consumer welfare.