Introduction: The overall prevalence of cigarette smoking has not changed significantly for over a decade in Bangladesh. Raising the price of cigarettes through taxation is an important policy instrument for reducing consumption and achieving public health goals. The price elasticity of cigarette demand is an important parameter for evaluating the effectiveness of raising prices through tax increases in reducing cigarette consumption. The objective of the study was to estimate the price elasticity of cigarette demand in Bangladesh using Global Adult Tobacco Survey 2009 and 2017 data.
Methods: Smoking prevalence and smoking intensity were estimated using a two-part model. Endogeneity of prices was minimised using the average consumption-weighted cigarette price in a cluster, for both smokers and non-smokers residing in a specific cluster.
Results: Cigarette demand was found to be price inelastic and ranged between -0.51 and -0.73. It is also price inelastic across wealth groups and areas of residence in Bangladesh. Although the total price elasticity did not differ considerably between rural and urban locations, it is evident that individuals in the lower-wealth group are more than twice as responsive to price increases as their high-wealth counterparts.
Conclusion: A significant increase in cigarette prices through a tax increase would decrease smoking prevalence and increase tax revenue in Bangladesh. The greater price sensitivity among smokers in lower-wealth groups indicates that a tax-induced cigarette price increase would provide more health benefits to them, thereby contributing to improved health equity.
Keywords: Economics; Low/Middle income country; Price; Socioeconomic status; Taxation.
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