Table 8. Household tobacco consumption, 2017

|ecile|Smoker H<br>|ouseholds, p<br>|ercentage<br>|Househ<br>toba<br>|old budget s<br>cco consum<br>|hare in<br>ption<br>|Share in h<br>cond<br>|ousehold co<br>itional on sm<br>|nsumption,<br>oking<br>|
|---|---|---|---|---|---|---|---|---|---|
|D|All<br>cigarettes|Filtered<br>cigarettes|Unfiltered<br>cigarettes|All<br>cigarettes|Filtered<br>cigarettes|Unfiltered<br>cigarettes|All<br>cigarettes|Filtered<br>cigarettes|Unfiltered<br>cigarettes|
|1|19.0|10.8|9.9|2.8|1.6|1.1|14.5|15.0|11.5|
|2|24.5|18.1|7.5|3.2|2.4|0.8|12.9|13.1|10.3|
|3|25.4|19.1|7.6|2.9|2.3|0.6|11.3|11.8|8.3|
|4|26.1|21.3|5.7|3.1|2.7|0.4|12.1|12.7|7.8|
|5|27.6|24.2|4.7|3.1|2.8|0.3|11.2|11.5|6.3|
|6|28.8|25.6|4.5|3.1|2.8|0.3|10.7|10.9|7.1|
|7|29.9|25.9|4.4|2.9|2.7|0.3|9.8|10.3|5.7|
|8|30.4|27.7|3.5|2.9|2.7|0.2|9.5|9.6|6.3|
|9|27.7|25.5|2.9|2.5|2.4|0.2|9.2|9.3|5.5|
|10|31.4|30.4|1.5|2.2|2.2|0.1|7.1|7.1|4.2|
|All|27.6|23.7|4.8|2.8|2.4|0.4|10.3|10.3|7.9|

_Source:_ Household Income and Expenditure Survey (HIES) 2017 and World Development Indicators (WDI). _Notes:_ Deciles are created based on household per capita consumption, based on the ECAPOV harmonized aggregate by the World Bank. Households are classified as “smoker” if they report positive expenses in tobacco products. Conditional shares are calculated only for households reporting positive expenditures on each type of cigarettes.

# VIII. Incidence results

Each component of Equation (1) of the ECBA was simulated using data from the IHS 2016, assuming three policy scenarios: 25 percent, 50 percent and 100 percent price increase on all cigarettes. The calculations below also assume that changes in household welfare related to smoking-attributable expenses only affect welfare through out-of-pocket payments.<sup>17</sup> Alternative simulations incorporating the value of total smoking-attributable expenses in the country—as well as imputing other price-elasticity structures—are available in Annex 7. All simulations reflect annual impacts for 2017.

## (A) Change in tobacco expenditures

Increasing the prices on tobacco products while holding all other things equal, negatively affects all smoker households, as they are forced to allocate a higher share of their budgets to continue to purchase the same quantities of tobacco. This scenario is known as “direct pass-through” (solid line on <u>Figures 3, Panel A to C),</u> as there are no changes in consumption, and the price-shock on tobacco is passed-though to or absorbed by smokers entirely. Because tobacco purchases represent a higher share of household budgets for lowerincome smokers, the direct pass-through effect is regressive, exercising higher damage to poorer smokers.

Nonetheless, households adjust consumption when faced with higher prices. As explained above, it is the interaction of the price shock, the price-responsiveness of each group of the population—incorporated as price elasticities—and the share of tobacco in household budgets that determine the change in tobacco expenditures. <u>Figure 3</u> presents these results with dotted lines for different elasticity assumptions. Assuming a 25 or 50 percent price increase (Panels A and B), the effect is still generally negative and somewhat regressive. Though the magnitude and regressive pattern is more moderate than under direct

> 17 The national estimate of smoking-attributable medical expenses (derived from Goodchild et al. 2018) and described above is adjusted by the factor of 56 percent of average out-of-pocket expenditure in medical bills.

17