Impacts of Tobacco Excise Increases on Cigarette Consumption and Government Revenues in Romania [Policy Brief]

This Policy Brief was written by Aspen Institute Romania in Romania. The policy brief estimates the price and income elasticity of demand for cigarettes in the context of the country's recent economic growth. This growth resulted in a 10% annual increase in income from 2015 to 2019, which is much higher than the increase in cigarette prices, likely contributing to the increase in household smoking prevalence in that time frame. The researchers find that the total price elasticity of demand is -0.545, and the income elasticity is 0.749. Low-income households are the most responsive to price increases, as a 10% increase would reduce consumption by 7.35%. The authors also simulate the impact of various excise tax increases. These results show that to reduce consumption, the price of cigarettes would have to increase by at least 11.5% assuming the income growth continues at the same pace. The policy brief concludes with recommendations for policy makers to reduce cigarette consumption by raising prices through excise tax increases.

A corresponding Report can be found here.