Promoting a tobacco free society

Economics Overview

Economics

Tobacco use poses unique challenges to our society. In particular tobacco products are traded commodities whose consumption has an impact on our social and economic resources. The economic aspects of tobacco use are, therefore, critical to the public health debate. However, until recently these aspects have received little public attention. There is a need to develop our understanding of the economic consequences of tobacco use and to build persuasive evidence about the most effective economic instruments to be used in addressing the tobacco epidemic.

Because of its addictive nature the demand elasticity of tobacco products, especially cigarettes, is relatively low at about 0.4 to 0.6. However, there is a strong social gradient in these data. While elasticity is comparatively low for higher income groups (0.2 to 0.3), it is quite high for lower income groups (0.8.). Young persons are also more sensitive to price than are adults. Further increases in tobacco taxes can, therefore, have a progressive rather than a regressive effect as the burden of the additional taxes falls proportionately more on higher income groups

High retail prices are the single most effective means to reduce tobacco consumption especially among lower income groups and children. Taxation in Ireland represents approximately 80% of the retail price of cigarettes and the level of taxes which is set each year is, therefore, critical to the efficacy of any public health policy which addresses the tobacco epidemic.

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