**Table 8. Baseline Descriptive Results, Household Survey 2013**

|_Indicator_|_Decile 1_|_Decile 2_|_Decile 3_|_Decile 4_|_Decile 5_|_Decile 6_|_Decile 7_|_Decile 8_|_Decile 9_|_Decile 10_|
|---|---|---|---|---|---|---|---|---|---|---|
|Household expenditure (US$)|311|398|431|458|518|523|576|620|685|1282|
|Proportion tobacco<sup>a</sup>|2.5|2.5|2.4|2.2|2.2|2.2|2.1|1.9|1.8|1.5|
|Households that smoke (%)|40|44|42|41|41|39|42|43|38|41|
|Woman-headed households<br>(%)|55|52|51|56|54|57|58|57|54|57|
|Age, household head<br>|51|50|51|53|52|53|54|54|53|51|
|Percentage HH with a Child<br>3–6years of age|28|26|20|16|15|10|11|8|7|4|

a. Proportional to total budget per household in each decile

# **4. Results**

The three scenarios in the tobacco price elasticity, lower bound, medium bound, and upper bound, are presented in table 3. These three scenarios allow an understanding of the ways results could change under different assumptions.

# **a. Tobacco price increase**

As a first step, the income changes for each income decile arising from the increase in tobacco prices are estimated based on low-, medium-, and upper-bound elasticity. Using equation (4) and tables 3 and 8, one can − calculate the effects of the tobacco price increase. For example, given the lower-bound elasticity ( 0.39) in table 3, the proportion of tobacco expenditure among the first decile (2.5 percent) in table 8, and a price increase of 25 percent, there was increased expenditure of 0.32 percent. This represents a loss in welfare among consumers because they have to devote a higher proportion of their incomes to purchase the same amount of tobacco and reduce their consumption of other goods. The results for all income deciles and elasticity scenarios are shown in table 9.

**Table 9. Direct Effects of the Price Increase Because of Taxes (%)**

|_Price shock scenario_|_Decile 1_|_Decile 2_|_Decile 3_|_Decile 4_|_Decile 5_|_Decile 6_|_Decile 7_|_Decile 8_|_Decile 9_|_Decile 10_|
|---|---|---|---|---|---|---|---|---|---|---|
|Complete pass-through|0.62|0.62|0.60|0.56|0.56|0.55|0.53|0.48|0.45|0.37|
|Low-bound elasticity|0.32|0.38|0.36|0.38|0.39|0.39|0.39|0.35|0.36|0.31|
|Medium elasticity|0.16|0.22|0.21|0.24|0.25|0.25|0.25|0.23|0.25|0.22|
|Upper-bound elasticity|0.01|0.07|0.06|0.10|0.11|0.12|0.12|0.11|0.14|0.13|

_Source:_ Proportion of household budget. Based on data of the 2013 household budget survey. _Note:_ The table shows the share of total household budget for each decile. Complete pass-through refers to elasticity equal to zero; consumers pay all the increased prices.

Across the three elasticities, the direct effect of the tobacco tax is a welfare loss, but in none of the cases does the shock seem to be regressive. In the low-, medium-, and upper-bound elasticity scenarios, the effect of the price increase is progressive, affecting higher-income groups in a higher proportion (figure 3). To show the effect of the elasticities on prices, table 9 includes the estimates of a complete pass-through scenario, whereby the increase in prices is completely passed to consumers without a reduction in consumption. Only in this case is the price shock regressive, affecting the lower-income deciles to a greater degree.

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