The Economics of Global Tobacco Control Prabhat Jha, Frank J Chaloupka
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Clinical review BMJ: first published as 10.1136/bmj.321.7257.358 on 5 August 2000. Downloaded from 21 Gourlay SG, Stead LF, Benowitz NL. Clonidine for smoking cessation. In: 25 Abbot NC, Stead LF, White AR, Barnes J, Ernst E. Hypnotherapy for Cochrane Collaboration. Cochrane Library. Issue 3. Oxford: Update Soft- smoking cessation. In: Cochrane Collaboration. Cochrane Library. Issue 3. ware, 2000. Oxford: Update Software, 2000. 22 Lancaster T, Stead LF. Mecamylamine for smoking cessation. In: 26 Ussher MH, West R, Taylor AH, McEwen A. Exercise interventions for Cochrane Collaboration. Cochrane Library. Issue 3. Oxford: Update Soft- smoking cessation. In: Cochrane Collaboration. Cochrane Library. Issue 3. ware, 2000. Oxford: Update Software, 2000. 23 Stead LF, Hughes JR. Lobeline for smoking cessation. In: Cochrane Col- 27 McAvoy BH, Kaner EF, Lock CA, Heather N, Gilvarry E. Our healthier laboration. Cochrane Library. Issue 3. Oxford: Update Software, 2000. nation: are general practitioners willing and able to deliver? A survey of 24 White AR, Rampes H, Ernst E. Acupuncture for smoking cessation. In: attitudes to and involvement in health promotion and lifestyle Cochrane Collaboration. Cochrane Library. Issue 3. Oxford: Update Soft- ware, 2000. counselling. Br J Gen Pract 1999;49:187-90. The economics of global tobacco control Prabhat Jha, Frank J Chaloupka Economics Few people now dispute that smoking is damaging Advisory Service, human health on a global scale.1 However, many World Health Summary points Organization, governments have avoided taking action to control 20 Avenue Appia, smoking—such as higher taxes—because of concerns CH-1211 Geneva Tax increases are the single most effective that their interventions might have harmful economic 27, Switzerland intervention to reduce demand for tobacco (tax consequences, such as permanent job losses. Prabhat Jha increases that raise the real price of cigarettes by senior scientist In 1997 the World Bank, in partnership with the 10% would reduce smoking by about 4% in high University of Illinois World Health Organization, began a global study on income countries and by about 8% in low income at Chicago, USA the economics of tobacco control. A team of over 40 or middle income countries) Frank J Chaloupka economists, epidemiologists, and tobacco control professor of economics experts critically examined the current state of knowl- Correspondence to: Tax comprises about two thirds of retail price of PJha edge about tobacco control. The aim was to provide a cigarettes in most high income countries but is [email protected] sound and comprehensive evidence base for the less than half of the total price on average in design of effective tobacco control policies in any lower income countries copyright. BMJ 2000;321:358–61 country, with an emphasis on the needs of the low http://www.bmj.com/ income and middle income countries, where most Improvements in the quality and extent of smokers live. A synopsis of this work, including interim information, comprehensive bans on tobacco 2 results, was published in 1999. Final results, including advertising and promotion, prominent warning 19 chapters and a statistical appendix, are now labels, restrictions on smoking in public places, 3 available. This article presents the key findings from and increased access to nicotine replacement this study. treatments are effective in reducing smoking Reducing the supply of tobacco is not effective in on 4 December 2019 at University of Cape Town Libraries. Protected by Methods reducing tobacco consumption Each chapter of the study relied on extensive literature Comprehensive tobacco control policies are searches and contact with experts working in the area. unlikely to harm economies A study database was compiled from various sources: the WHO’s tobacco database (www.who.int/toh/ Library/whopub.htm); agricultural data on consump- Findings tion (www.econ.ag.gov/briefing/tobacco/); a commer- cial tobacco database (www.marketfile.com); a World Scale of the problem Bank survey of over 70 countries on consumption, About 80% of the world’s 1.1 billion smokers live in low prices, taxes, control policies, and other variables (www. income and middle income countries.4 Data from high worldbank.org/html/extdr/hnp/health/tobacco.htm); income countries, where the tobacco epidemic is well and World Bank macroeconomic and demographic established among men, suggest that about half of long data (www.worldbank.org/data/wdi2000/). This study term regular smokers are killed by tobacco and that, of database was used to estimate smoking prevalence these, about half die in middle age (35-69 years old). across the seven World Bank regions, price levels Worldwide, about four million people died of tobacco across countries, the effectiveness and cost effectiveness related disease in 1998.4 This figure is expected to rise of interventions, the impact of bans on advertising and to 10 million annual deaths by 2030, with 70% of these promotion, the estimation of revenues, the impact of deaths occurring in low income countries. Peto and trade on consumption, and the impact of tax increases Lopez estimate that about 100 million people were Extra tables showing the on smuggling. Some analyses, such as for smuggling, killed by tobacco in the 20th century and that, for the contribution of were restricted to the set of countries for which 21st century, the cumulative number could be one bil- tobacco to various complete data were available. Details of specific lion if current smoking patterns continue.1 Many of countries’ economies appear methodologies are provided in each chapter of the these deaths over the next few decades could be 3 on the BMJ’s study. Anonymous peer reviewers reviewed each prevented if current smokers quit, but in low income website chapter. and middle income countries quitting is rare. For 358 BMJ VOLUME 321 5 AUGUST 2000 bmj.com Clinical review BMJ: first published as 10.1136/bmj.321.7257.358 on 5 August 2000. Downloaded from example, only about 5% of males in Mumbai, India, are 5 600 former smokers. Baseline 500 Economic rationale for intervening in the tobacco If proportion of young adults starting market smoking halves by 2020 400 Some economists have argued that smokers know all If adult consumption halves by 2020 of the risks and bear all the costs of their choice.6 They 300 argue that there is therefore no economic justification for governments to intervene in tobacco markets. 200 There are, however, three “market failures” in the tobacco market: inadequate information about the 100 health risks of tobacco, inadequate information about the risks of addiction, and physical or financial costs Cumulative No of tobacco related deaths (millions) 0 imposed on non-smokers.78 1900 1950 2000 2025 2050 General awareness of the risks of smoking is Year relatively low in low income and middle income coun- Fig 1 Cumulative numbers of smoking related deaths according to tries.9 For example, a representative national survey in three scenarios. Only current smokers quitting will substantially China found that 55% of Chinese non-smokers and reduce the number of deaths in the next 50 years. Adapted from Peto and Lopez1 69% of smokers believed that cigarettes did “little or no harm.”10 While there is more widespread general awareness of the risks of smoking in high income countries, many people underestimate these risks rela- 3.5 80 Average price tive to other health risks, and many fail to internalise 3.0 Average tax 70 11 % of tax share these risks. Similarly, young people seem to under- 60 2.5 estimate the risks of addiction. Among US students in 50 their final year at high school, fewer than two out of five 2.0 40 smokers who believe that they will quit within five years 1.5 Percentage of tax share actually do so.12 About seven out of 10 adult smokers in 30 1.0 20 high income countries say they regret starting and Average price or tax per pack ($) would like to stop.13 Recent economic modelling 0.5 10 suggests that, even if young people “decide” to risk 0 0 copyright. High Upper Lower Low becoming addicted, imperfect information can result income middle middle income http://www.bmj.com/ in seemingly rational decisions being later viewed with income income regret.14 Countries by income Ideally, interventions that specifically address a Fig 2 Average cigarette price, tax, and percentage of tax share per pack by countries’ income for 1996. If tax is to account for four market failure should be implemented as the “best” fifths of the retail price, this requires prices to be increased by four options. In the tobacco market such “best” interven- times the manufacturer’s (untaxed) price per pack. Thus, if the tions would include educating young people about the manufacturer’s price is $0.50 then the tax rate would be $2 and the risks of addiction and disease from smoking or restrict- retail price $2.50. Depending on retail factors, an increase of this order would raise the population weighted retail price by 80-100% in ing their access to tobacco. However, the evidence on 4 December 2019 at University of Cape Town Libraries. Protected by low income and middle income countries suggests that these measures are relatively ineffec- tive.815 In contrast, taxation, albeit a blunt instrument and thus a “second best” intervention, is clearly effective at protecting children from taking up high income countries and by about 8% in low income smoking. More practically, any tobacco control policy and middle income countries. The evidence indicates whose sole effect was to deter children from starting that young people, people on low incomes, and those smoking would have little impact on numbers of with less education are more responsive to price 16 smoking related deaths for many decades, since most changes.