Year of Publication
2016
College
Martin School of Public Policy and Administration
Date Available
11-3-2017
Committee Chair
Dr. Eugenia F. Toma
Executive Summary
The objective of this study examines whether the way to raise cigarette prices drastically and discontinuously is effective in reducing cigarette consumption. We use monthly data for cigarette consumption to measure the price elasticity of cigarettes’ demand and adopt real cigarette prices, real individual income, education level, and unemployment rate as independent variables. We consider how consumers adjust their consumption practices in response to the increased prices. After examining the result of regression, we conclude that cigarette real price has a significant association with the reduction in cigarette consumption. If we divide the last twelve years into periods when prices remained stable and periods characterized by a sharp price increase, we will see a statistically significant effect in the last period with a steep price increase. The results show that in reducing the cigarette consumption, the sharp price increase in cigarette prices at a drastic tax rate is a good alternative to the gradual price increase at an appropriate rate.
Recommended Citation
Yoo, Bohyun, "The impact of increased cigarette prices on cigarette consumption" (2016). MPA/MPP/MPFM Capstone Projects. 289.
https://uknowledge.uky.edu/mpampp_etds/289
Included in
Policy Design, Analysis, and Evaluation Commons, Sales and Merchandising Commons, Taxation Commons
