Transcript Internal costs - Global Tobacco Control

Section B
A Look Ahead: Summary of Main Findings
 2007 Johns Hopkins Bloomberg School of Public Health
The Costs of Smoking
Presented by Dr. Hana Ross
 American Cancer Society
 The International Tobacco Evidence Network (ITEN)
 2007 Johns Hopkins Bloomberg School of Public Health
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Perspectives for Costing
Society
 Most comprehensive perspective
Individuals and households
Public finances
Businesses and employers
 2007 Johns Hopkins Bloomberg School of Public Health
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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
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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
 2007 Johns Hopkins Bloomberg School of Public Health
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Tobacco Taxation
Presented by Frank J. Chaloupka, PhD
 University of Illinois at Chicago
 The International Tobacco Evidence Network (ITEN)
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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
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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
 2007 Johns Hopkins Bloomberg School of Public Health
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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:
ΔQ/Q
ΔP/P
Example:
-10/100
0.1/1
equals
 2007 Johns Hopkins Bloomberg School of Public Health
-0.1
0.1
equals
-1.0
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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
 2007 Johns Hopkins Bloomberg School of Public Health
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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).
 2007 Johns Hopkins Bloomberg School of Public Health
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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.
 2007 Johns Hopkins Bloomberg School of Public Health
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Economic Analysis of the Supply of Tobacco Products
Presented by Teh-wei Hu, PhD
 University of California, Berkeley
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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
 2007 Johns Hopkins Bloomberg School of Public Health
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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
 2007 Johns Hopkins Bloomberg School of Public Health
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Illicit Trade: Economic, Public Health Consequences
Presented by Ayda A. Yurekli, PhD
 International Development Research Center
 2007 Johns Hopkins Bloomberg School of Public Health
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Economic Impacts of Illicit Trade
Lost tax revenues
More organized crime
Loss of revenue and investment opportunities for legitimate
producers
Unemployment in legitimate production
 2007 Johns Hopkins Bloomberg School of Public Health
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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
 2007 Johns Hopkins Bloomberg School of Public Health
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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
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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)
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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
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