AFFORDABILITY AND CONSUMPTION OF CIGARETTES IN TEN

SEE COUNTRIES

Mihajlo Djukic1
Institute of Economic Sciences, Belgrade, Serbia

Aleksandar Zdravkovic2
Institute of Economic Sciences, Belgrade, Serbia

Olivera Jovanovic3
Institute of Economic Sciences, Belgrade, Serbia

Jovan Zubovic4
Institute of Economic Sciences, Belgrade, Serbia

Marko Vladisavljevic5
Institute of Economic Sciences, Belgrade, Serbia

MOTIVATION
Tobacco taxes are the most effective tool for reducing tobacco consumption
(Chaloupka, F.J. et al. 2012; Ho, L. et al. 2018, Jovanovic, et al. 2018). However,
effects of taxation largely depend on the income changes as the income increase
could easily offset the price effects (Husain et al. 2017). Importance of including
affordability measure when when designing tobacco taxation policy has been
recognized within main global tobacco control manuals and policy
recommendations (Blecher, 2020).

RESEARCH QUESTION
Taking into account, relatively widespread tobacco consumption in SEE countries,
research analyses trends in cigarettes’ affordability over the period 2009-2019.
Additionally, it aims to assess whether affordability changes have had impact on
cigarettes’ consumption in 10 selected SEE countries, out of which 5 Western
1
E-mail: mihajlo.djukic@ien.bg.ac.rs
2
E-mail: aleksandar.zdravkovic@ien.bg.ac.rs
3
E-mail: olivera.jovanovic@ien.bg.ac.rs
4
E-mail: jovan.zubovic@ien.bg.ac.rs
5
E-mail: marko.vladisavljevic@ien.bg.ac.rs
Balkan countries (Albania, Bosnia and Herzegovina, Montenegro, North
Macedonia and Serbia) and the other 5 EU members (Hungary, Slovenia, Romania,
Bulgaria and Croatia).

METHODOLOGY
Research follows methodology developed by Blecher and Van Welbeck, (2004),
later modified by He et al. (2018). It has been developed a fixed effects panel
regression model to estimate affordability elasticity – change of the cigarettes
consumption per capita (dependent variable) resulting from changes in
affordability (independent variable).

RESULTS
Affordability trend over the observed period vary across the SEE region. In some
countries affordability remained constant (North Macedonia) or recorded
negligible decrease (Bulgaria), while in others could be observed significant
affordability reductions (Montenegro and Bosnia and Herzegovina). Results clearly
show that per capita consumption was negatively associated with affordability
and affordability reductions over the observed period were followed by significant
decrease in consumption.

CONTRIBUTION
Affordability is definitely the most significant determinant of tobacco
consumption and should be incorporated into tobacco taxation policy frameworks
in each of the observed countries. We propose development of Tobacco
Affordability Indicator aiming to monitor annual affordability changes at the
national level, also providing useful data for time and cross-country comparisons.

KEY WORDS
Affordability, Cigarettes, Tobacco, Consumption, Southeastern Europe

JEL CLASSIFICATION
I18, P36, H21

REFERENCES
1) Blecher, E. H., & Van Walbeek, C. P. (2004). An international analysis of
cigarette affordability. Tobacco Control, 13(4), 339-346.

2) Blecher E. (2020). Affordability of Tobacco Products: The Case of Cigarettes.

Tobacconomics White Paper. Chicago, IL: Tobacconomics, Health Policy
Center, Institute for Health Research and Policy, University of Illinois at
Chicago, 2020.

3) Chaloupka, F. J., Yurekli, A., & Fong, G. T. (2012). Tobacco taxes as a tobacco
control strategy. Tobacco control, 21(2), 172-180.

4) He, Y., Shang, C., & Chaloupka, F. J. (2018). The association between cigarette
affordability and consumption: An update. PLoS One, 13(12), e0200665.

5) Ho, L. M., Schafferer, C., Lee, J. M., Yeh, C. Y., & Hsieh, C. J. (2018). Raising
cigarette excise tax to reduce consumption in low-and middle-income
countries of the Asia-Pacific region: a simulation of the anticipated health and
taxation revenues impacts. BMC Public Health, 18(1), 1-9.

6) Husain, M. J., Kostova, D., Mbulo, L., Benjakul, S., Kengganpanich, M., &
Andes, L. (2017). Changes in cigarette prices, affordability, and brand-tier
consumption after a tobacco tax increase in Thailand: Evidence from the
Global Adult Tobacco Surveys, 2009 and 2011. Preventive medicine, 105, S4-
S9.

7) Jovanovic, O., Zubović, J., Vladisavljević, M., Bodroža, D., Ljumović, I.,
Domazet, I., & Đukić, M. (2018). Estimation of tobacco products price and
income elasticity using aggregate data. Economic Analysis, 51(3-4), 81-94.