Publication: The Economics of Tobacco in Estonia
Date
2004-06
ISSN
Published
2004-06
Author(s)
Taal, Anneli
Kiivet, Raul
Hu, Teh-Wei
Abstract
The study examines prevalence of tobacco
use in Estonia, expenditures by smokers, and the prevalence
of prominent diseases for which tobacco use is an important
risk factor. It estimates private and public direct and
indirect costs associated with smoking in Estonia for 1998,
looking at health care costs, fires, loss of household
income, productivity losses, sickness benefits and
disability, retirement and survivors' pensions. The
total cost to the government in additional expenditures and
lost revenues is estimated to be well over EEK 200 million
greater than the tobacco tax revenues generated and reduced
pension expenditures resulting from premature deaths
attributable to tobacco. The second part of the paper
estimates the relationship between cigarette prices
(adjusted for inflation) and demand, including legal and
illegal purchases by Estonians and by foreign visitors to
Estonia. The price elasticity of cigarette demand is
estimated at -0.34, implying that each 10 percent rise in
the real price of cigarettes in Estonia will cause
consumption to fall by about 3.4percent. The analysis shows
that a tobacco tax rate increase will increase tax revenue
from local consumption despite substitution between legal
and illegal consumption, but that revenues will be greatly
affected by the extent to which visitors (mostly from
Finland) continue to buy (tax paid) cigarettes in Estonia.
Stricter tobacco control measures, including higher taxation
of cigarettes, would lead to healthier people, the avoidance
of premature death, and increased productivity, which can
only improve the economic performance of the country.
Citation
“Taal, Anneli; Kiivet, Raul; Hu, Teh-Wei. 2004. The Economics of Tobacco in Estonia. HNP discussion paper;. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/164d12e1-3efe-5ef9-aa04-de76710df866 License: CC BY 3.0 IGO.”