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ECONOMIC ANALYSIS OF TOBACCO AND OPTIONS FOR TOBACCO CONTROL: China Case Study

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  • Hu, Teh-Wei
  • Mao, Zhengzhong

Abstract

More than 320 million people in China smoke, which accounts for nearly one-third of all the smokers in the world. Almost two-thirds of adult Chinese men are smokers. On the other hand, tobacco production is a state-run enterprise that provides substantial earnings and tax revenue for the government. This paper addresses this policy dilemma by analyzing the impact of an additional cigarette tax on the entire economy. Economic analyses have shown that price elasticities of the demand for cigarettes range from –0.40 to –0.70. At a price elasticity of –0.54, for instance, a 40 cent increase in tax from 1.60 yuan per pack to 2.00 yuan tax per pack (raising the retail price from 4.00 yuan to 4.40 yuan) would reduce consumption by 4.57 billion packs, generate additional central government revenues of 24.74 billion Yuan and save 1.44 to 2.16 million lives. The increase in central government tax revenue would be twice as large as the total losses in industry revenue, tobacco farmers’ incomes and local tax revenue (12.27 billion Yuan). Therefore, considering both the health and economic benefits, additional taxation on cigarettes in China would be a desirable public policy for the Chinese government to consider.

Suggested Citation

  • Hu, Teh-Wei & Mao, Zhengzhong, 2002. "ECONOMIC ANALYSIS OF TOBACCO AND OPTIONS FOR TOBACCO CONTROL: China Case Study," University of California at San Francisco, Center for Tobacco Control Research and Education qt5x2015sv, Center for Tobacco Control Research and Education, UC San Francisco.
    • Handle: RePEc:cdl:ctcres:qt5x2015sv
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    References listed on IDEAS

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    1. Hu, T.-W. & Tsai, Y.-W., 2000. "Cigarette consumption in rural China: Survey results from 3 provinces," American Journal of Public Health, American Public Health Association, vol. 90(11), pages 1785-1787.
    2. Frank J. Chaloupka & Adit Laixuthai, 1996. "U.S. Trade Policy and Cigarette Smoking in Asia," NBER Working Papers 5543, National Bureau of Economic Research, Inc.
    3. Chee‐Ruey Hsieh & Teh‐Wei Hu & Chien‐Fu Jeff Lin, 1999. "The Demand For Cigarettes In Taiwan: Domestic Versus Imported Cigarettes," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 223-234, April.
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    1. Wang, Hong & Sindelar, Jody L. & Busch, Susan H., 2006. "The impact of tobacco expenditure on household consumption patterns in rural China," Social Science & Medicine, Elsevier, vol. 62(6), pages 1414-1426, March.
    2. Hang Fu & Da Feng & Shangfeng Tang & Zhifei He & Yuanxi Xiang & Tailai Wu & Ruoxi Wang & Tian Shao & Chunyan Liu & Piaopiao Shao & Zhanchun Feng, 2017. "Prevalence of Tobacco Smoking and Determinants of Success in Quitting Smoking among Patients with Chronic Diseases: A Cross-Sectional Study in Rural Western China," IJERPH, MDPI, vol. 14(2), pages 1-10, February.
    3. World Bank, 2011. "Philippine Health Sector Review," World Bank Publications - Reports 27397, The World Bank Group.
    4. Liu, Yuanli & Rao, Keqin & Hu, Teh-wei & Sun, Qi & Mao, Zhenzhong, 2006. "Cigarette smoking and poverty in China," Social Science & Medicine, Elsevier, vol. 63(11), pages 2784-2790, December.
    5. Anne Maryse Pierre-Louis & Katherina Ferl & Christina Dinh Wadhwani & Neesha Harnam & Montserrat Meiro-Lorenzo, 2014. "Setting the Stage to Address the Dual Challenge of MDGs and NCDs," Health, Nutrition and Population (HNP) Discussion Paper Series 100278, The World Bank.

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