Tursan d’Espaignet (2018) find that tobacco-related diseases accounted for 5.7 percent of global health expenditure in 2012 and that the total economic costs of smoking, including health expenditure and productivity losses, were equivalent to 1.8 percent of the world’s gross domestic product (GDP) (US$1.85 trillion in purchasing power parity U.S. dollars). The highest share, according to these authors, was in high-income countries (US$1.12 trillion in purchasing power parity dollars), where the tobacco epidemic is the most advanced.<sup>7</sup> Nearly 40 percent of these costs are concentrated in developing countries, reflecting the substantial burden experienced by this group of countries. Earlier estimates of Lightwood et al. (2000) indicate that the gross health cost of tobacco in high-income countries is between 0.1 percent and 1.0 percent of GDP. Likewise, Pichón-Riviere et al. (2014) estimate the annual direct cost of tobacco-related disease in the Chilean health system at approximately 0.6 percent of GDP.

Tobacco price increases are also associated with expansion in productive life years. Verguet et al. (2015) analyze the health effects of a price increases in China and conclude that a 50 percent rise in prices would result in 231 million life years gained over 50 years and would have a significant impact among the poor. In contrast, PichónRiviere et al. (2014) estimate that tobacco use in Chile would reduce life expectancy for smokers by nearly 4.0 years among women and 4.3 years among men.

Similarly, exposure to secondhand smoke has a strong relationship with many respiratory diseases among children and adults (DHHS 2004, 2014; Mason, Wheeler, and Brown 2015; Öberg et al. 2011). According to the World Health Organization, secondhand smoke is responsible for over 890,000 premature deaths per year (WHO 2017). In the United States, exposure to secondhand smoke costs an estimated US$5 billion annually in direct medical costs and over US$5 billion more in indirect medical costs, that is, disability and lost wages (Behan, Eriksen, and Lin 2005). In the state of Indiana, the health-related costs of secondhand smoking have been estimated at more than US$1.3 billion annually (Mason, Wheeler, and Brown 2015). In contrast, McGhee et al. (2006) estimate the cost of direct medical care, long-term care, and productivity losses because of secondhand smoke exposure in Hong Kong SAR, China, at approximately US$156 million annually. Results from the 2011 Global Youth Tobacco Survey in South Africa indicate that 1 in 3 students ages 11–18 in 10 live in homes where someone smokes, and 4 in 10 are around others who smoke in places outside the home.

Tobacco taxation has been recognized as one of the most effective strategies to decrease smoking. In highincome countries, a 10 percent increase in the price of cigarettes is associated with a decrease in the demand for cigarettes of approximately 4 percent (World Bank 1999). In low- and middle-income countries, an equivalent increase is associated with an average 6 percent reduction in cigarette consumption (IARC 2011). Higher taxes have the additional benefits of reducing exposure to secondhand smoke and increasing government revenues.

In South Africa, the 1994 excise tax-induced increase in cigarette prices led to significant reductions in tobacco use (Chaloupka et al. 2000; van Walbeek 2002a). Chelwa, van Walbeek, and Blecher (2017) estimate that, by 2004, per capita cigarette consumption was 36 percent lower than it would have been without South Africa’s strong tobacco tax policy. Similarly, van Walbeek (2005) finds that price increases in 1990–2000 reduced the regressivity of the cigarette excise tax in South Africa. Stacey et al. (2018) argue that more aggressive excise tax policies on tobacco in South Africa could lead to improvements in health and revenue. They estimate that an excise rate of 60 percent on tobacco would result in a gain of 858,923 life years.

Other tobacco control interventions are also relevant in decreasing demand but have a smaller impact on tobacco consumption. Several studies have found that health publicity has contributed to a reduction in

> 7 Goodchild, Nargis, and Tursan d’Espaignet (2018) estimate the economic cost of smoking-attributable diseases at US$15 billion in low-income countries, US$359 billion in lower-middle-income countries, and US$354 billion in upper-middleincome countries, all in purchasing power parity U.S. dollars.

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