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Analysis of the Effect of Cigarette Price Hike  

Kim Do-Hoon (KT&G Central Research Institute)
Han Kwang-Hwan (KT&G Central Research Institute)
Publication Information
Journal of the Korean Society of Tobacco Science / v.27, no.2, 2005 , pp. 235-243 More about this Journal
Abstract
The government continuously increases cigarette price to reduce the smoking rates. Opinions of cigarette makers and Ministry of Health and Welfare on the effect of cigarette price hike are sharply opposed. This dispute is important because there is possibility of additional increase of cigarette price by 500 won. Therefore, as an inquiry into existing studies for the effect of cigarette price hike on tobacco product, namely analysis of the effect of cigarette price hike consumption, we empirically analyzed the effect of cigarette excise tax hike through establishing improved analytic models considering time trend. As a result, it is substantiated that time trend in the effect of cigarette excise tax hike is certainly exist and early impact is heavy. However, the amount of cigarette consumption is recovered to the level of the average in 5 months. Since it is proved that the long term effect of cigarette price hike is immaterial, health authority should reconsider the plan of additional raising cigarette price by 500 won.
Keywords
cigarette excise tax; cigarette price; price elasticity; effect of price hike; time trend;
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