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The Role of Economic Research in Accelerating Tobacco Control. Teh-wei Hu Professor Emeritus of Health Economics University of California, Berkeley To be presented at Tobacco Control Research in China Symposium October 19-21, 2011 Lijiang, Yunnan, China. Overview.
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The Role of Economic Research in Accelerating Tobacco Control Teh-wei Hu Professor Emeritus of Health Economics University of California, Berkeley To be presented at Tobacco Control Research in China Symposium October 19-21, 2011 Lijiang, Yunnan, China
Overview • Goal of the WHO Framework Convention on tobacco control • How can economic research be used for tobacco control • Future topics of economic research can accelerate tobacco control • The way forward
Goals of the WHO Framework Convention on Tobacco Control-Interpreted in Economics- • To reduce the demand and supply of tobacco products through government intervention
How Can Economic Research be Used for Tobacco Control? • To justify government intervention on tobacco control • To reduce the demand for cigarettes • To reduce the supply of tobacco products
To Justify Government Intervention • Economic cost of smoking • Effective tobacco tax schemes • Earmark part of tax revenue for tobacco control/health promotion
Economic Cost of Smoking (in 2008 price) Cost Estimate% of 2000 2000: RMB 50 billion (US$7.2 billion) 2003: RMB 119 billion (US$17.1 billion) 137% 2008: RMB 200 billion (US$ 28.9 billion) 300% Yang, Sung, Mao, Hu (2011)
Effective Tobacco Tax Scheme • Specific excise tax is the most effective measure for tobacco control (avoid tax evasion and avoidance) • China has only 0.06 RMB per pack • 2009 tax adjustment only changed ad valorem tax rate at producer/wholesale price level WHO (2010), Hi, Mao, Shi (2010)
Earmark Part of Tax Revenue for Tobacco Control on Health Care • More benefit than cost for tobacco control and improve equity for low income smokers • Recent examples in Thailand, US, Australia, New Zealand, and HK (SAR)
To Reduce the Demand for Cigarettes • Through price (and tax) and quantitative relationships to predict cigarette consumption (and quantity) • Predict government revenue changes Mao, Hu, Sung (2008)
Through Price (and tax) and Quantitative Relationships to Predict Cigarette Consumption Change • Price elasticity of the demand for cigarettes between -0.15 to -0.50 (one third responded to quitting and two thirds responded to the amount of reduction) Mao, Hu, Sung (2008)
Predict Government Revenue Change • Increase RMB 1 per pack, government would increase 86 billion RMB (price elasticity at 0.15) 65 billion RMB (price elasticity at 0.50) Hu, Mao, Shi, Chen (2008)
To Reduce the Supply of Tobacco • Help farmers to understand the costs and economic returns of alternative crops versus tobacco leaf Revenue cost ratio: Tobacco 0.99 Mulberry 4.00 Fruit 2.00 Vegetable Oil 1.70 Hu, Mao, Jiang, et al (2007)
Future Topics of Economic Research that could Accelerate Tobacco Control • Study tobacco control on regional impact • Study the impact of separating the China National Tobacco Company from the government ownership
The Way Forward • Translate economic research findings to top government policy makers • Communicate findings to media professions • If national tobacco tax reform is not possible, pilot tax experiments might be considered