costs such as productivity losses from morbidity and mortality.<sup>28</sup> Ideally, we would want disaggregated cost estimates by disease to have a more accurate estimate of these costs. Nonetheless, given the data available, the aggregate estimate of Goodchild, Nargis, and Tursan d’Espaignet (2018) is the best alternative. The estimated medical costs in South Africa are R 18.9 billion, equivalent to US$1.4 billion in 2015 prices. More research is needed to obtain more accurate estimates of the economic costs of treating each tobacco-related disease in South Africa.

**Table 7 –Private Medical Costs and Tobacco-Related Events, South Africa**

||**Average**<br>**price**|**Number of tobacco-**<br>**related events(2015)**|**Medical cost**<br>**(millions)**|
|---|---|---|---|
|M01 acute myocardial infarction<br>M04 heart failure|R 71,367<br>R 32,138|101,858<br>-|R 7,269|
|M05 malignant neoplasm of bronchus and lung|R 29,311|6,750|R 198|
|M07pneumonia|R 21,897|-||
|**Totalprivate medical cost**|||R 7,467|
|**Total medical cost**|||R 14,415|

_Source:_ Lorenzoni and Roubal 2016; tobacco-related events data: GBD Results Tool (database), Global Burden of Disease Study 2016, Global Health Data Exchange, Institute for Health Metrics and Evaluation, Seattle, http://ghdx.healthdata.org/gbd-results-tool; consumer price index: “Table B: CPI Headline,” Stats SA, Pretoria, http://www.statssa.gov.za/publications/P0141/CPIHistory.pdf. _Note:_ Consumer price index data of Statistics South Africa were used to convert to 2015 prices. Admissions with procedures are excluded. Total medical costs assume that private medical costs represent 51.8 percent of total tobacco-related medical costs. To estimate the economic cost of treating tobacco-related diseases, we multiply the average price of each treatment by the number of events related to tobacco (assuming that most individuals were treated at some point).

Table 8 summarizes the most important indicators, including total monthly household expenditures and the share of expenditures on tobacco products. The share of household expenditures on tobacco rises with income until the eighth decile but decreases for the last two deciles. Thus, tobacco consumption prevalence is concentrated in South Africa’s middle class. Meanwhile, poorer households are less likely to have smokers: 18 percent do among the poorest decile, and fewer than 30 percent do in the top two deciles.

**Table 8 - Baseline Descriptive Results, National Income Dynamics Study, 2014–15**

||||||_De_|_cile_|||||
|---|---|---|---|---|---|---|---|---|---|---|
||_1_|_2_|_3_|_4_|_5_|_6_|_7_|_8_|_9_|_10_|
|Avg. household monthly expenditure (US$)|99|127|155|160|190|215|251|363|577|1,664|
|<br>Proportion of tobacco expenditure<sup>a</sup>|1.0|1.1|0.9|1.3|1.3|1.5|1.6|1.6|1.1|0.6|
|<br>Households with tobacco expenditure (%)|17.7|24.6|25.9|27.4|28.4|34.3|33.2|35.7|30.6|30.1|
|<br>Age, household head|51|50|49|46|45|44|41|40|41|46|
|<br>Household with a child age 3–6 (%)|59|48|46|34|30|21|16|13|13|5|
|Average household size|9.4|7.2|6.9|5.5|4.9|4.5|3.8|3.8|3.1|2.7|

_Source:_ Estimates based on harmonized datasets by World Bank staff of the National Income Dynamics Study, wave 4, 2014–15. _Note:_ Deciles were created using per capita household expenditure. Exchange rate for 8/31/2015 (Rand to US$), South African Reserve Bank.

a. Proportional to total budget per household in each decile; households that smoke = 1 if a household member reports spending on tobacco products.

# **5. Results**

To analyze the distributional effects of an increase on tobacco taxes, we estimate the effect on prices and medical expenditures, aggregating these two into a single measure. The price elasticities estimated in table 2,

> 28 “Health care expenditures are those incurred from the diagnosis and treatment of smoking-attributable diseases (hospitalization, physician services, medications, etc.), while non–health care expenditures are incurred outside of the health system (e.g., property loss from fires caused by cigarettes)” (Goodchild, Nargis, and Tursan d’Espaignet 2018, 2).

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