Effectiveness of tax policy changes in Montenegro: smoking behaviour by socio-economic status

Abstract

BackgroundThe main goal of this study was to examine the responsiveness of smoking prevalence and cigarette consumption to price and income changes by income groups and the effectiveness of tax policy changes to reduce cigarette consumption in Montenegro.Data and methodsA two-part model was applied to estimate smoking participation, smoking intensity price and income elasticity. The first part of the model applies logit regression, while the second uses Deaton’s model to improve the validity and objectivity of conditional (smoking intensity) elasticity results. A generalised linear model (GLM) was applied to verify robustness. The reason for this is that Deaton’s model is commonly used in the analysis of Household Budget Survey (HBS) data, especially when households do not report the market price. Moreover, using this model, it is possible to capture the shading of quality to price change. The analysis used HBS data (2006–2017).ResultsThe estimates indicate that tobacco pricing policies had a much higher impact on smoking prevalence in the low-income group (price elasticity of −0.595) relative to the high-income group (price elasticity of −0.344). The same conclusion could be drawn for the smoking intensity elasticity: the high-income group was the least affected by changes in price (price elasticity of −0.258). At the same time, the most affected was the low-income group, with price elasticity of −0.424. Poorer households spent a larger share of their budget on cigarettes. The simulation results confirm that increases in the specific excise taxes of 58.3% on tobacco would reduce total cigarette consumption by 11.25% while increasing the collection of government revenue by 8.07%.ConclusionSmoking prevalence and consumption are very responsive to price and income changes, with considerable differences in elasticities between income groups. The taxation policy has a positive impact on changing patterns of consumption and public revenues across each income group. Low-income and middle-income households would benefit the most, while on the other hand, the highest revenue collection was generated from the wealthiest group. Our results align with results obtained so far for other low-income and middle-income countries. This paper contributes to the analysis of the smoking prevalence and cigarette consumption responsiveness to price and income changes, which was conducted for the first time in Montenegro.

Changes in the Socioeconomic Pattern of Smoking Among Male Adults in Thailand from 2001 to 2021

“…The smoking rate did not decrease as much in the youngest group (aged 15-24 years) as in the other age groups. This result is inconsistent with many studies conducted in other countries indicating that price policies significantly affected the smoking rate among young people (Cizmovic et al, 2022;Nikaj & Chaloupka, 2014;Sweis & Chaloupka, 2014). However, this result is consistent with a previous study conducted in Thailand, which indicated that friends were the primary source of cigarettes among young people (Hammond et al, 2008).…”

Socioeconomic differences in the impact of prices and taxes on tobacco use in low- and middle-income countries–A systematic review

“…One study, rated at moderate risk of bias, found that households in Bosnia and Herzegovina with lower total expenditures were more responsive to cigarette prices, with differences large enough to be economically meaningful [ 63 ]. Another study, rated at serious risk of bias, found that low- and middle-SES households were more responsive to price than high-SES households in Montenegro [ 62 ]. A third study, rated at critical risk of bias, found some statistically significant socioeconomic differences in price responsiveness for cigarette/bidi smoking initiation in India; differences, however, were very small and unlikely to be meaningful [ 57 ].…”

“…Lastly, the most important limitation was the lack of formal assessment of socioeconomic differences in price responsiveness. Only seven of 32 studies formally assessed statistically whether own-price effects were modified by SES; three used interactions [ 38 , 39 , 46 ] while four used seemingly unrelated regressions to conduct Wald tests of equality of coefficients across equations [ 33 , 57 , 62 , 63 ].…”

“…More detailed study characteristics of included studies are presented in the S3 Appendix. Out of the 32 PLOS GLOBAL PUBLIC HEALTH PLOS GLOBAL PUBLIC HEALTH (1994,1996,1998,2000,2002,2004,2005,2006,2008,2010 PLOS GLOBAL PUBLIC HEALTH PLOS GLOBAL PUBLIC HEALTH PLOS GLOBAL PUBLIC HEALTH PLOS GLOBAL PUBLIC HEALTH PLOS GLOBAL PUBLIC HEALTH studies, two were conducted using data from Sub-Saharan Africa (Kenya, Tanzania) [32,33], 11 from Latin America (Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Mexico, Peru) [34][35][36][37][38][39][40][41][42][43][44], two from eastern Asia (China) [45,46], three from south-eastern Asia (Philippines, Thailand) [47][48][49], eight from Southern Asia (Bangladesh, India, Iran, Pakistan) [50][51][52][53][54][55][56][57], and six from eastern Europe (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia) [58][59][60][61][62][63]. We did not identify any studies from northern Africa, the Caribbean, central Asia, or Oceania.…”

Achieving policy impact on tobacco economics research: experiences and lessons learnt

“…The papers included in this supplement span the regions of Asia, Latin America, and Southeastern Europe. The research focuses on consumer responses to cigarette price increases (Divino et al, 14 Nguyen et al, 15 Vladisavljevic et al 16 ) as well as their distributional impacts (Cruces et al, 17 Gligorić et al, 18 Divino et al, 19 Cizmovic et al, 20 Nguyen et al 15 ). Two papers analyse tax leakages along the tobacco supply chain: Vladisavljevic et al 16 use data from a primary survey in the Southeastern European region to analyse determinants of tobacco tax evasion and Drope et al examine the regional implications of the tobacco value chain in Paraguay.…”