Decrease Affordability to Reduce Consumption of Cigarettes in Southeastern Europe

This Policy Brief was written by the Institute of Economic Sciences (IES) in Serbia. This policy brief discusses the trends in the affordability of cigarettes in ten countries in Southeastern Europe. The researchers assessed affordability using two measures: the increase in overall level of prices relative to increase in real tobacco prices (TAI) and the percentage share of GDP per capita needed to purchase 100 packs of cigarettes (RIP). Although there was a decrease in the affordability on average between 2008 and 2018, there was variation in the region. While cigarettes have become significantly less affordable in Montenegro and Bosnia and Herzegovina, affordability has remained constant in North Macedonia. The findings show that affordability is a main determinant of consumption. Decreasing the affordability of cigarettes by one percentage point would result in a 1.2 percentage point decrease in annual consumption. The policy brief concludes with recommendations for effective cigarette tax policies that include measures of affordability.

A corresponding Working Paper can be found here.