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Interactive data visualizations of antibiotic use and resistance in North America and Europe
Ramanan Laxminarayan directs the Center for Disease Dynamics, Economics & Policy. He is also a visiting scholar and lecturer at Princeton University. His research deals with the integration of epidemiological models of infectious diseases and drug resistance into the economic analysis of public health problems.
Shawn Magnuson's work focuses on tobacco policies and malaria. His interest in addressing international public health problems in innovative ways led him to work at CDDEP. He earned bachelor's degrees in Economics and Anthropology at the University of Maryland. His prior work covered international development, HIV/AIDS and economic policy analysis. At CDDEP, he has contributed to projects related to tobacco policy, modeling bacteria, meningitis and other areas. On the soccer field, he is a fearsome and prolific goal scorer.
How would taxing cigarettes and bidis affect smoking rates in India? How do socioeconomic factors affect the impact of such taxes?
The threat posed by smoking to health in India is severe. Already 1 in 5 of all adult male deaths and 1 in 20 of all adult female deaths at ages 30-69 are due to smoking and India will soon have 1 million smoking deaths a year. Increasing tobacco prices has been found to be the single most effective method to reduce smoking. Yet, bidis, the most common form of smoked tobacco in India, are largely untaxed, while cigarettes are taxed at about 40% of retail price, well below the 65–80% rate noted by the World Bank in countries with effective tobacco control policies. Moreover, low and stagnant tax rates have occurred in a period in which all tobacco products have become more affordable with income growth. First, we use data from the most recent three consecutive quinquennial National Sample Survey (NSS) rounds (NSS 50, 55 and 61 conducted in 1993/94, 1999/00 and 200/05) and a two-equation system of budget shares and unit values that attempts to correct for quality and measurement error. Second, we pool data from the most recent nine rounds of NSS (NSS 55-57, 59-64, conducted between 1999/00 to 2007/08). Our analyses of single and repeated cross-sections yield own-price elasticity for bidis that are roughly in keeping with existing evidence. We find that a 10% increase in bidi prices would reduce the demand for bidis by about 6 to 9.5%. We find, however, that own-price elasticity for cigarettes in India is substantially larger than previously thought. Our estimates suggest that cigarette users are at least as responsive as bidi users to price changes. On the whole, our analyses suggest that low SES households are likely more responsive to price changes than high SES households. Our analyses also uncovers important and policy-relevant cross-prices effects. Findings from this study provide additional evidence of the effectiveness of tobacco prices at reducing tobacco use.
CDDEP board member Sir Richard Peto has been named the 2011 recipient of BMJ’s Lifetime Achievement Award for having “contributed much to the decrease in neoplastic, vascular, and respiratory mortality from smoking, both in the UK and elsewhere.”
The Surgeon General’s office has released its 30th report on the health effects of tobacco, finding that exposure to tobacco smoke—mainstream or secondhand--causes immediate bodily damage. The report cites tobacco use as the “leading preventable cause of premature death in the United States,” resulting in approximately 443,000 deaths annually and costing the U.S. health system more than $193 billion.
How do cigarette prices affect smoking prevalence in developing countries, given the option of rustic tobacco alternatives?
Higher cigarette prices may only divert cigarette smokers to rustic tobacco rather than leading them to quit.
Taxing cigarettes may not be an effective policy in developing countries.
Studies of the impact of tobacco prices on decisions to initiate and quit smoking have, to date, largely been restricted to developed countries. Such analyses, when set in developing countries, are complicated by the availability of a wide range of tobacco products that are nicotine substitutes for cigarettes. This study, which uses data from two rounds of the Vietnam Living Standards Survey in 1992-1993 and 1997-1998, finds evidence of substitution among tobacco products in response to changes in relative prices and points to the need for comprehensive tobacco-control strategies that are not restricted to cigarettes alone. We find that higher cigarette prices may not necessarily encourage quitting and may only divert cigarette smokers to rustic tobacco, which is potentially as harmful to human health as cigarettes. Copyright © 2004 John Wiley & Sons, Ltd.
Federal and state alcohol taxes have fallen from about 22% to about 10% of retail price. Is it time to reverse this declining trend and substantially raise tax rates?
Alcohol taxes have a valuable role to play in deterring drunk driving. Tripling alcohol taxes from 10 to 30% would reduce consumption by about 8 to 15% and raise about $20 billion per year in government revenue.
An alcohol tax of roughly three times the current level might be justified on economic efficiency grounds, and perhaps more if alcohol consumption negatively impacts workplace productivity. But this depends on productive use of revenues, and assumes continued failure to severely punish drunk drivers.
Due to the failure to increase nominal rates in line with inflation, federal and state alcohol taxes have fallen from about 22 percent of the pretax retail price of alcoholic beverages in 1980 to about 10 percent at present. Is it time to reverse this declining trend and substantially raise tax rates? Alcohol taxation is warranted if its consumption causes broader societal costs that are not taken into account by individual drinkers. The main categories of such costs are medical treatments for alcohol-related illnesses, reduced
Although excise taxes on beer, wine, and spirits raise about $15 billion a year in revenue for federal and state governments, current alcohol tax rates in the United States are low by historical standards. In 1980, alcohol taxes represented about 22 percent of the pre-tax price of alcohol, whereas now, with the failure to raise nominal rates in line with inflation, they have fallen to about 10 percent of the pre-tax price (see Figure 1). Are current alcohol tax levels about right, or should they be increased?
What are the optimal levels of alcohol taxes and drunk driver penalties in terms of their effects on reducing drunk driving and overall welfare?
Compared to a drunk driver penalty that has an equal effect on reducing drunk driving, an alcohol tax will create higher overall welfare gains due to the government revenue it generates.
Alcohol taxes are currently far below their optimal levels in most cases.
Alcohol taxes are typically justified as a means to address externalities from alcohol abuse and to raise government revenue. Prior literature has focused on measuring the Pigouvian tax but has paid little attention to the fiscal rationale. This paper presents an analytical and simulation framework for assessing the optimal levels, and welfare effects, of alcohol taxes and drunk driver penalties, accounting for both externalities and how policies interact with the broader fiscal system. Under plausible parameter values and recycling possibilities, the fiscal component of the optimal alcohol tax may be as large, or larger, than the externality-correcting component. Therefore, fiscal considerations can significantly strengthen the case for higher alcohol taxes. They also raise the welfare gains from alcohol taxes relative to those from drunk driver penalties, and they warrant differential taxation of individual beverages on an alcohol equivalent basis.