The Association between Cigarette Affordability and Consumption

Abstract Objectives To calculate cigarette affordability for 78 countries worldwide from 2001 to 2014 using the Relative Income Price (RIP) ratio defined as the percentage of per capita GDP required to purchase 100 packs of cigarettes using the lowest price from Economist Intelligence Unit (EIU) database, examine the association between cigarette affordability and cigarette consumption, and calculate the affordability elasticity of demand. Design and Methods RIP (2001-2014) was calculated for 16 low-income economies, 19 lower middle-income economies, 13 upper middle-income economies, and 30 high-income economies. Ordinary least square regressions were used to analyze the association between cigarette affordability and consumption. Results and Conclusions Per capita consumption continued to rise in low-income countries and decreased slightly in lower middle-income countries as the RIP of cigarette consistently declined in low- and lower middle-income economies from 2001 to 2014. The real cigarette prices continued to decline in low- and lower middle-income countries and continued to rise in upper middle- and high-income countries. Though cigarettes were more expensive in HICs than were in LMICs, cigarettes were more affordable in HICs than were in LMICs. The regression results show a 10% increase in the RIP of cigarettes led to a 2% decrease in per capita consumption. The affordability elasticity of demand differed significantly between HICs and LMICs. However, the effect of cigarette affordability on consumption has not changed over time. To control the smoking epidemic, low- and lower middle-income countries should further increase cigarette prices. The rate of price increase should exceed the rate of economic growth and outpace the inflation rate to make cigarettes less affordable and thereby reducing tobacco use.