CONFERENCE PROCEEDING
Price elasticity estimates of cigarette demand in Vietnam using survey data
 
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Development and Policies Research Center, Hanoi, Vietnam
CORRESPONDING AUTHOR
Nuong Nguyen   

Development and Policies Research Center, Hanoi, Vietnam
Publication date: 2021-09-02
 
Tob. Induc. Dis. 2021;19(Suppl 1):A57
 
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ABSTRACT
Introduction:
Excise taxes are widely recognized as the most effective measure to reduce tobacco use. The Vietnamese Government has been working towards a tax reform to put tobacco taxation to its best use in Vietnam.

Objectives:
To inform the taxation policy discussion, this study estimated the price elasticity of cigarette demand and investigated differential price-responsiveness among sub-populations by gender, age and income.

Methods:
The study used data from Wave 1 (2018) of an ongoing longitudinal survey within the project “Make Tobacco Taxation Work in Vietnam”. It was conducted with a nationally representative sample of 1,639 current smokers aged 18 years and above. Along with a smoker questionnaire, a separate questionnaire was designed to collect information on the prices of cigarette brands available on survey sites. The Ordinary Least Squares method was used to estimate the price elasticity of cigarette demand with price data obtained from local tobacco outlets that can alleviate the endogeneity of the price variable.

Results:
The estimated price elasticity of cigarette demand was -0.165. By gender, the price elasticity was -0.158 for males and -0.349 for females, but only statistically significant for male group. By age, the price elasticity was statistically significant for two groups, 35-55 and 56 or older, at -0.116 and -0.181, respectively. Also, the price elasticity was statistically significant for only low- and middle-income groups, at -0.251 and -0.180, respectively.

Conclusion(s):
Compared to the estimates of the previous studies in Vietnam using data collected before 2000, our price elasticity estimates of cigarette demand were considerably lower. The potential explanation is that due to the rapid economic growth and weaknesses of an ad valorem tax system, cigarettes have become increasingly affordable over time. Thus, two actions are urgently implemented to reduce tobacco use: (i) to significantly increase tobacco taxes; (ii) to switch to a mixed tax system including specific components.

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