## **Baseline descriptive results**

Table 5 summarizes the most important indicators, including total monthly household expenditures and the share of expenditures on smoked tobacco products in 2016. As of 2016, there was at least one smoker in each of 40 percent of all households. The share was highest among households in deciles 6–7 (an average 46 percent) and lowest in low-income households (32 percent). On average, households spent 0.9 percent of their total income on cigarettes, and lower-income households spent the highest share. For instance, the poorest decile spent 1.3 percent relative to 0.5 percent among the richest.

**Table 5 – Baseline Descriptive Results, 2016, by Decile**

|_Indicator_|_1_|_2_|_3_|_4_|_5_|_6_|_7_|_8_|_9_|_10_|
|---|---|---|---|---|---|---|---|---|---|---|
|Expenditure per capita (Rub., monthly)|1,760|2,932|3,754|4,594|5,451|6,553|7,857|9,653|13,109|29,712|
|Expenditure per hh (Rub., monthly)|6,942|11,821|14,327|16,450|18,697|21,647|28,081|30,709|38,848|81,548|
|Prop. of exp. on tobacco products, %|1.3|1.1|0.9|0.9|0.9|1.1|0.8|0.8|0.7|0.5|
|HH that smoke tobacco, %|32|40|37|39|39|47|45|44|41|40|
|HH Size|3.9|4.0|3.8|3.6|3.4|3.3|3.6|3.2|3.0|2.8|
|Area (regional center), %|21|29|29|36|41|43|45|47|54|58|
|Female, %|0.55|1.55|2.55|3.55|4.55|5.55|6.55|7.55|8.55|9.55|
|Age 16-34, %|35|37|37|36|32|38|35|33|34|31|
|Age 35-54, %|35|31|32|31|32|33|33|36|34|36|
|Age 55+, %|30|32|31|34|35|29|32|31|32|34|
|Higher education, %|10|16|15|19|19|21|23|25|32|38|
|Years smoking (for smokers)|25|25|24|24|25|24|25|25|25|25|

_Source:_ Estimates based on Russia Longitudinal Monitoring Survey–HSE 2016. _Note:_ Deciles have been established using per capita household expenditure.

# **5. Results**

To analyze the distributional effects of an increase in tobacco taxes, we estimate the effect on prices, medical expenditures, and working life years, aggregating these three into a single measure. The price elasticities estimated in table 1, including the lower- and upper-bound elasticities, allow us to understand how the results could change under different assumptions.

# **Tobacco price increase**

Income changes that arise from an increase in tobacco prices are estimated for each decile based on low-, medium-, and upper-bound elasticities. Using the price elasticities and the share of household expenditure on tobacco by decile, we can simulate the effects of an increase in tobacco prices (see annex A, equation A.2). To show the effect of the elasticities on prices, table 6 also includes estimates of a complete passthrough scenario (i.e. assuming a price elasticity equal to zero), whereby the increase in prices is completely transferred to consumers without a reduction in consumption. For instance, if we assume that the prices for tobacco products rose by 25 percent, given the medium-bound elasticity for cigarettes for the bottom decile (−0.68) in table 1 and the proportion of cigarettes expenditures for the bottom decile (1.3 percent) in table 5, the expected increase in household expenditures would be 0.01 percent (table 6). This represents a loss in welfare because consumers would devote a higher share of their incomes to purchasing the same amount of tobacco, thereby reducing the consumption of other goods. These results hold for all the scenarios analyzed.

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