Price Elasticity Estimates of Cigarette Demand in Vietnam

Eozenou, Patrick and Fishburn, Burke (2001): Price Elasticity Estimates of Cigarette Demand in Vietnam. Unpublished.

Abstract

In this paper, we analyze a complete demand system to estimate the price elasticity for cigarette demand in Vietnam. Following Deaton (1990), we build a spatial panel using cross sectional household survey data. We consider a model of simultaneous choice of quantity and quality. This allows us to exploit unit values from cigarette consumption in order to disentangle quality choice from exogenous price variations. We then rely on spatial variations in prices and quantities demanded to estimate an Almost Ideal Demand System. The estimated price elasticity for cigarette demand is centered around -0.53, which is in line with previous empirical studies for developing countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Price elasticity; Cigarette Demand; Taxation; Consumption; Vietnam
• Subjects: I - Health, Education, and Welfare > I1 - Health > I12 - Health Production: Nutrition, Mortality, Morbidity, Suicide, Substance Abuse and Addiction, Disability, and Economic Behavior; D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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