South Africa has since 1994 consistently and aggressively increased excise taxes on cigarettes in order to maintain a total tax burden of around 50% of the average retail selling price. The tax rises have translated into large increases in the inflation-adjusted price of cigarettes. For instance, the average real price per pack increased by 110% between 1994 and 2004. This paper uses a transparent and data-driven technique, the Synthetic Control method, to evaluate the impact on cigarette consumption of South Africa’s large-scale tobacco tax increases. We find that per capita cigarette consumption would not have continued declining in the absence of the consistent tax rises that began in 1994. Specifically, we find that by 2004, per capita cigarette consumption was 36% lower than it would have been had the tax increases not occurred. Our treatment effect estimates survive a series of placebo and robustness tests.
by 