Effect of cigarette prices on cigarette consumption in Ghana

Abstract

Introduction: Noncommunicable diseases are on the rise globally, with tobacco consumption being a major risk factor. Reducing tobacco consumption is an important step towards reducing the incidence and prevalence of many noncommunicable diseases. Tax and price measures have been proposed as tobacco control tools. This study investigated the link between cigarette prices and cigarette consumption in Ghana. Methods: Annual time series data for the period 1980–2016 were used. The data came from diverse sources, including WHO, World Bank, and tobacco industry documents. Dynamic Ordinary Least Squares (DOLS), cointegration techniques, and three-stage least squares (3SLS) were used to analyze the data. Results: After controlling for education, income, and population growth, we estimated that the price elasticity of cigarette demand is between -0.35 and -0.52 and statistically significant at 1% level. In the short run, the price elasticity is -0.1. Another variable that significantly reduced cigarette consumption during the period was education, with an elasticity between -1.7 and -2.7. Conclusion: Cigarette demand in Ghana is influenced by cigarette prices and education. We conclude that tobacco taxes that significantly raise retail prices of cigarettes and higher education (including health education) will help reduce cigarette consumption.

Keywords

• Cigarette consumption
• Taxation
• Price
• Ghana
• Elasticity