Elasticity

The Demand for Cigarettes: New Evidence from South Africa

This paper provides an extensive analysis of the demand for cigarettes based on longitudinal data drawn from the South Africa National Income and Dynamic Study (NIDS: 2008 - 2014). We compare the results of the pooled OLS (POLS), the standard two-part model, the random and the fixed effect (RE, FE) panel regression. Like previous evidence into cigarette prices, we obtain negative price elasticity of demand for cigarettes, with the conditional elasticity (POLS and RE estimates) signicantly smaller than the total price elasticity (two-part model estimates).

The Elasticity of Taxable Income: The case of South Africa

A central tax policy parameter that has received much attention internationally, but about which there is substantial uncertainty, is the overall elasticity of taxable income. The size of this elasticity is of critical importance in the formulation of tax and transfer policy, as well as for the study of the welfare implications of tax decisions. This paper uses a panel of individual tax returns for the period 2009 - 2013 and the phenomenon of ’bracket creep’ as source of tax rate variation to construct instrumental variable estimates of the sensitivity of income to changes in tax rates.

The Impact of Economic Freedom on Economic Growth in the SADC: An Individual Component Analysis

The SADC is attempting to achieve development and economic growth. This paper investigates the relationship between economic freedom – in aggregate and on an individual component basis – on economic growth in the SADC. The annual data for 13 SADC countries from 2000 to 2009 are used to construct a generalised method of moments, dynamic panel-data model. When cross-sectional dependence of the error term, individual- and time-specific effects are controlled, economic freedom and GDP per capita are positively related and freedom Granger-causes growth.

Consumer demand for alcoholic beverages and tobacco in Lesotho: A double-hurdle approach

In this paper, we estimate income elasticities and investigate the determinants of alcohol and tobacco consumption in Lesotho using a Double-Hurdle model on the 2002/03 Lesotho HBS data. The results reveal that both alcohol and tobacco are income inelastic with estimated elasticities of 0.6553 and 0.3561, respectively. Given this, therefore, we argue that differentiated tax hikes, with a relatively higher rate on tobacco, can be more effective both as a consumption deterrent and revenue increasing policy, without much compromise on employment and poverty.

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