Economic Analysis Using ITC Data: Developing the Evidence Base for FCTC Policies

1. Economic Analysis Using ITC Data: Developing the Evidence Base for FCTC Policies NigarNargis, Ph.D. Assistant Professor, Department of Economics, University of Dhaka Principal Investigator, ITC Bangladesh Project Bureau of Economic Research, University of Dhaka Research Associate, ITC Project, University of Waterloo WCTOH, March 19, 2012

2. Uniqueness of ITC Data • Nationally representative sample (randomly selected and large in size) • Longitudinal survey design • Uniform survey questionnaire and comparable variables across countries • ITC covers 10 high-income and 10 low- and middle- income countries at different stages of the tobacco epidemic and tobacco control policy environment • Natural experimental setup for cross-country analysis

3. Individual specific data • Average daily consumption of cigarettes • Brands of factory-made cigarettes last purchased • Brands typically consumed • Source and volume of purchase • Price paid per unit of purchase (packs/cartons/loose) • Use of sales incentives (e.g., free samples, special price, gift from shopkeeper, discount coupons, sponsorship, logo clothing, promotion) • Household socio-economic status (income, expenditure, wealth index, housing index) • Level of education • Demographics (age, gender, marital status, religion, race, ethnicity) • Area of residence

4. Empirical strategy: cigarette demand function and price elasticity • Conditional price elasticity of cigarette demand can be estimated for countries that have only smoker respondents • Both smoking participation and conditional price elasticity can be estimated for Bangladesh from ITC enumeration of sample population • Endogeneity of price can be dealt with using instrumental variable estimation method • OLS as well as fixed/random effects estimation allowed • Choice of brand can be modeled in simultaneous equation model of brand choice and quantity of cigarettes consumed

5. Dynamics of smoking behavior Change in smoking status • Smoker  Quitter • Smoker  Smokeless tobacco user Quitter • Smoker  Quitter  Smoker • Smokeless tobacco user  Smoker • Non-smoker  Smoker Compensating behavior—cost minimization • Switching brands • Switching type of smoked tobacco products • Switching between smoked and smokeless tobacco products • Tax avoidance

6. Application 1 • Abdullah, et al. (2011). Socioeconomic Differences in Exposure to Tobacco Smoke Pollution (TSP) in Bangladeshi Households with Children. International Journal of Environmental Research and Public Health, 8 (3), 842-860.

7. 1.1 Objectives and Methods • This study assessed the pattern of exposure to tobacco smoke pollution (TSP) in Bangladeshi households with children and examined the variations in household smoking restrictions and perception of risk for children‘s exposure to TSP by socioeconomic status. • Data came from1,947 respondents from Bangladeshi households with children from the first wave (2009) of the International Tobacco Control (ITC) Bangladesh Survey.

8. 1.2 Results • 43.5% of the respondents had complete smoking restrictions at home and 39.7% were very or extremely concerned about TSP risk to children‘s health. • Participants with lower level of education were significantly less likely to be concerned about the risk of TSP exposure to children‘s health and less likely to adopt complete smoking restrictions at home. • Logistic regression revealed that the predictors of concern for TSP exposure risk were educational attainment of 1 to 8 years (OR = 1.94) or 9 years or more (OR = 4.07) and being a smoker (OR = 0.24). • The predictors of having complete household smoking restrictions were: urban residence (OR = 1.64), attaining education of 9 years or more (OR = 1.94), being a smoker (OR = 0.40) and being concerned about TSP exposure risk to children (OR = 3.25).

9. 1.3 Conclusions • The findings show that a high proportion of adults with children at home smoke tobacco at home and their perceptions of risk about TSP exposure to children‘s health were low. • These behaviours were more prevalent among rural smokers who were illiterate. • There is a need for targeted intervention, customized for low educated public, on TSP risk to children‘s health and tobacco control policy with specific focus on smoke-free home.

10. Application 2 • Licht, et al. (2011). Socio-economic Variation in Price Minimizing Behaviors: Findings from the International Tobacco Control (ITC) Four Country Survey. International Journal of Environmental Research and Public Health, 8 (1), 234-252.

11. 2.1 Objectives and Methods • This paper examines how socio-economic status (SES) modifies how smokers adjust to changes in the price of tobacco products through utilization of multiple price minimizing techniques. • Data came from International Tobacco Control Policy Evaluation (ITC) Four Country Survey, nationally representative samples of adult smokers and includes respondents from Canada, the United States, the United Kingdom and Australia. Cross-sectional analyses were completed among 8,243 respondents (7,038 current smokers) from the survey wave conducted between October 2006 and February 2007. • Analyses examined predictors of purchasing from low/untaxed sources, using discount cigarettes or roll-your-own (RYO) tobacco, purchasing cigarettes in cartons, and engaging in high levels of price and tax avoidance at last purchase. All analyses tested for interactions with SES and were weighted to account for changing and under-represented demographics.

12. 2.2 Results • Relatively high levels of price and tax avoidance behaviors were present; 8% reported buying from low or untaxed source; 36% used discount or generic brands, 13.5% used RYO tobacco, 29% reported purchasing cartons, and 63% reported using at least one of these high price avoidance behaviors. • Respondents categorized as having low SES were approximately 26% less likely to report using low or untaxed sources and 43% less likely to purchase tobacco by the carton. • Respondents with low SES were 85% more likely to report using discount brands/RYO compared to participants with higher SES. • Overall, lower SES smokers were 25% more likely to engage in at least one or more tax avoidance behaviors compared to their higher SES counterparts

13. 2.3 Conclusions • Price and tax avoidance behaviors are relatively common among smokers of all SES strata, but strategies differed with higher SES groups more likely to report traveling to a low-tax location to avoid paying higher prices, purchase duty free tobacco, and purchase by cartons instead of packs all of which were less commonly reported by low SES smokers. Because of the strategies lower SES respondents are more likely to use, reducing price differentials between discount and premium brands may have a greater impact on them, potentially increasing the likelihood of quitting.

14. Application 3 • Licht, et al. (2011b).“How Do Price Minimizing Behaviors Impact Smoking Cessation? Findings from the International Tobacco Control Four Country Survey,” International Journal of Environmental Research and Public Health, 8, 1671-1691.

15. 3.1 Objective and Methods • This paper examines how price minimizing behaviors impact efforts to stop smoking. • Data on 4,988 participants from the International Tobacco Control Policy Evaluation (ITC) Four-Country Survey who were smokers at baseline (wave 5) and interviewed at a 1 year follow-up were used. • The paper examined whether price minimizing behaviors at baseline predicted: (1) cessation, (2) quit attempts, and (3) successful quit attempts at one year follow up using multivariate logistic regression modeling. • A subset analysis included 3,387 participants who were current smokers at waves 5 and 6 and were followed through wave 7 to explore effects of changing purchase patterns on cessation. • Statistical tests for interaction were performed to examine the joint effect of SES and price/tax avoidance behaviors on cessation outcomes.

16. 3.2 Results • Smokers who engaged in any price/tax avoidance behaviors were 28% less likely to report cessation. • Persons using low/untaxed sources were less likely to quit at follow up, those purchasing cartons were less likely to make quit attempts and quit, and those using discount cigarettes were less likely to succeed, conditional on making attempts. • Respondents who utilized multiple behaviors simultaneously were less likely to make quit attempts and to succeed.

17. 3.3 Conclusions • SES did not modify the effects of price minimizing behaviors on cessation outcomes. • The data from this paper indicate that the availability of lower priced cigarette alternatives may attenuate public health efforts aimed at to reduce reducing smoking prevalence through price and tax increases among all SES groups.

18. Application 4 • Nargis, N., Ruthbah, U.H., Hussain, AKM G., Ashiquzzaman, S.M., Fong. G.T., and Huq, I. (2011) “Pricing and Taxation of Tobacco Products in Bangladesh: Findings from Wave 1 (2009) and Wave 2 (2010) of the ITC Bangladesh Survey,” ITC Project Working Paper Series, University of Waterloo, Waterloo, Ontario, Canada, May.

19. 4.1 Objectives and Methods • This working paper presents the findings from the International Tobacco Control (ITC) Policy Evaluation Surveys and Enumeration conducted in Bangladesh in 2009 and 2010. • The Wave 1 (2009) Survey consisted of a nationally representative sample of 2,510 adult smokers and 2,116 adult non‐smokers aged 15 years and older. These respondents form a cohort, who were re‐contacted to answer follow‐up surveys in 2010.

20. 4.2 Results • Average cigarette and bidi consumption in Bangladesh remained unabated between 2009 and 2010, in response to the moderate tax changes on these two products. • The estimates of price elasticity of demand confirm that cigarette and bidi consumption could be significantly reduced by increasing taxes on these products. • As the cigarette smokers with lower SES are more price sensitive, they will cut down their smoking by a larger percentage than the smokers with higher SES. As a result, greater health gains will accrue to those with lower SES. Tobacco tax can thus contribute to reduction in health inequality as well.

21. 4.3 Policy recommendations • Short-term strategy: Reduce the gap between the tax rates for different tiers of cigarette prices and work toward uniform tax rates. • Medium-term strategy: Reduce the tax gap between bidis and the cheapest cigarettes and introduce a specific excise tax floor. • Long-term strategy: Harmonize the excise tax rate and replace ad valorem tax with specific excise tax.

22. Application 5 • Saenz-de-Miera, B., et al. (2010). “Self-reported price of cigarettes, consumption and compensatory behaviours in a cohort of Mexican workers before and after a cigarette tax increase,” Tobacco Control.

23. Objectives and Methods • To assess the impact of a 2007 cigarette tax increase from 110% to 140% of the price to the retailer on cigarette price and consumption among Mexican smokers, including efforts to offset price increases. • Data were analysed from the 2006 and 2007 administrations of the International Tobacco Control (ITC) Policy Evaluation Survey in Mexico, which is a population-based cohort of adult smokers. Self-reported price of last cigarette purchase, place of last purchase, preferred brand, daily consumption and quit behaviour were assessed at baseline and follow-up.

24. Results • Self-reported cigarette prices increased by 12.7% after the tax increase, with prices for international brands increasing more than for national brands (13.5% vs 8.7%, respectively). • Although the tax increases were not fully passed onto consumers particularly on national brands, no evidence was found for smokers changing behaviour to offset price increases. • Consistent declines in consumption across groups defined by sociodemographic and smoking-related psychosocial variables suggest a relatively uniform impact of the tax increase across subpopulations. • However, decreased consumption appeared limited to people who smoked relatively more cigarettes a day (>5 cigarettes/day). • Average daily consumption among lighter smokers did not significantly decline. • A total of 13% (n=98) of the sample reported being quit for a month or more at follow-up. • In multivariate models, lighter smokers were more likely than heavier smokers to be quit.

25. Conclusions • Results suggest that the 2007 tax increase was passed on to consumers, whose consumption generally declined. • Since no other tobacco control policies or programmes were implemented during the period analysed, the tax increase appears likely to have decreased consumption.