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THE WELFARE EFFECTS OF TOBACCO TAXATION: Estimates for 5 countries/regions by

By Deepak Lal, Hyongwon Kim, Gonglu Lu and Jordi PratDeepak Lal, Hyongwon Kim, Gonglu Lu and Jordi Prat

Abstract

This paper provides estimates of the economic welfare effects of tobacco taxation in India, S.Africa, S.Korea, Japan and the European Union. It argues that past studies of the cost-benefits of smoking are flawed as they fail to net out Pareto-irrelevant pecuniary externalities. It estimates tobacco demand for both the myopic and rational addiction models and finds the latter invariably perform better. It finds that the net welfare losses associated with (a) current tax levels (b)an increase over current taxation of 10 % and (c) an increase of 10 % a year for!0 years in all these countries, but particularly in the poorest, are large

Year: 2011
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