1. A Look Ahead: Summary of Main Findings
Section B
A Look Ahead: Summary of Main Findings

2. The Costs of Smoking Presented by Dr. Hana Ross
American Cancer Society
The International Tobacco Evidence Network (ITEN)

3. Perspectives for Costing
Society
Most comprehensive perspective
Individuals and households
Public finances
Businesses and employers

4. Classification of Costs
Direct costs: reduction in existing resources
Indirect or productivity costs: reduction in potential resources due to premature morbidity or mortality
Includes lost wages due to time off from work and lower quality of life (can be internal or external)
Internal costs (private): costs borne by the fully informed smoker
External costs (externalities): health and productivity losses to community due to secondhand smoke

5. Healthcare Costs Attributable to Smoking
Calculate the smoking-attributable fraction of total costs
Eliminate nonsmokers
Eliminate diseases among smokers not caused by smoking
Subtract average health care costs for the population
Calculate the population-attributable risk from:
The relative risk that smokers have of getting a specific condition compared to nonsmokers or
The relative risk for those exposed to secondhand smoke (SHS) compared to those not exposed
The 2006 U.S. Surgeon General’s Report presents relative risks for exposure to SHS

6. Tobacco Taxation Presented by Frank J. Chaloupka, PhD
University of Illinois at Chicago
The International Tobacco Evidence Network (ITEN)

7. Why Tax Tobacco? To promote public health
To induce current users to try to quit, keep former users from restarting, and prevent potential users from starting
To reduce consumption among those who continue to use
To generate revenue
To recover the costs of treating smoking-related illnesses and lost productivity

8. Types of Tobacco Taxes Taxes on value of tobacco crop
Customs duties on tobacco leaf imports and/or exports
Customs duties on tobacco product imports and/or exports
Sales taxes

9. Elasticity of Demand Price elasticity of demand
A measure of the responsiveness of the quantity demanded of a good to change in price
Equals the percentage change in quantity demanded divided by the percentage change in price:
Example:
ΔQ/Q
ΔP/P
-1.0
-10/100
0.1/1
-0.1
0.1
equals

10. Elasticity of Demand Crossprice elasticity of demand
Measures the extent that the quantity demanded of one good changes when the price of another good changes
Elastic demand
Elasticity less than –1.0
The quantity demanded decreases proportionately more than the price increases
Inelastic demand
Elasticity greater than –1.0
The quantity demanded decreases by less than the percentage increase in price
Evidence shows that demand for smoking is inelastic

11. Consumption and Price of Cigarettes: China, 1990–1999
Source: adapted by CTLT from study by Teh-wei Hu and the U.S. Department of Agriculture (2002).

12. Consumption and Price of Cigarettes: U.S., 1970–2006
Source: adapted by CTLT from Tax Burden on Tobacco, The Campaign for Tobacco Free Kids (2007) and authors’ calculations.

13. Economic Analysis of the Supply of Tobacco Products
Presented by Teh-wei Hu, PhD
University of California, Berkeley

14. Tobacco Supply
The tobacco leaf is a very important cash crop in many developing countries
More than 125 countries grow tobacco
The global tobacco crop is worth approximately $20 billion in U.S. currency—but less than one percent of the value of the global agricultural sector
There are about 20 million tobacco farmers globally
Many governments rely on the tobacco leaf as a major source of local tax revenue

15. The Economic Importance of Supply
For many countries that produce tobacco leaf and manufacture cigarettes—such as China, India, and Indonesia—tobacco control is more of an economic issue than a public health issue
For these countries, although tobacco control can have a negative economic effect in the short run, the benefits of smoking control have a larger positive long-term economic effect

16. Illicit Trade: Economic, Public Health Consequences
Presented by Ayda A. Yurekli, PhD
International Development Research Center

17. Economic Impacts of Illicit Trade
Lost tax revenues
More organized crime
Loss of revenue and investment opportunities for legitimate producers
Unemployment in legitimate production

18. What Can be Done about Illicit Trade?
Have high penalties
End duty-free sales
Tax stamps
License cigarette exporters, manufacturers, and distributors
Require a unique identifying code on all packs
Make cigarette exporters responsible for final legal destination of cigarettes

19. Conclusion: Economics and Tobacco Control
Taxes that increase the price of cigarettes reduce the demand and raise the revenue
The demand for smoking is inelastic with respect to price
Cigarette consumption will decrease—but by proportionately less than the increase in price

20. Conclusion: Economics and Tobacco Control
There are strong economic arguments for governments to control both the supply and the consumption of tobacco, including the following:
External health care costs related to smoking and secondhand smoke
Negative health effects and economic losses that accrue not just to the smokers but also to nonsmokers and to society at large (negative externalities)

21. Conclusion: Economics and Tobacco Control
Economic arguments for government intervention
The addictive nature of tobacco consumption combined with underage consumption and a lack of full knowledge by consumers
The disproportionate economic impact of smoking on relatively poor countries and poor populations within countries