The effect of cigarette price changes on smoking prevalence by gender: The case of South Africa

South Africa successfully reduced smoking prevalence by substantially increasing tobacco excise tax and therefore real cigarette prices between 1993 and 2010. Tobacco market structure changed in 2010 following the entry of local tobacco companies and the introduction of cheaper cigarette brands. Illicit cigarettes have also increased significantly. This paper estimates price elasticities of smoking prevalence by gender and examines the effect of an increase in illicit cigarettes and changes in tobacco market structure on smoking behavior in South Africa. Two nationally representative longitudinal data sets and cigarette price data from Statistics South Africa, are used. We use pooled fractional probit correlated random effects and panel LPM models for estimation. Smoking prevalence and price sensitivity are higher among males than among females. Price elasticity of smoking prevalence is about -0.33 overall, -0.43 for males and -0.20 for females. The increase in illicit cigarettes and availability of cheaper brands reduce the effect of price on smoking prevalence and undermine tobacco control policy. The relatively price-inelastic demand implies that there is room for an increase in excise tax on cigarette. We recommend a further increase in excise taxes on tobacco and implementing a track and trace system to control illicit trade.

Working paper 859
1 April 2021

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...

Search Resources

Ground Floor Brookside Building
11 Imam Haron Road
Claremont, 7700
Cape Town

PostNet Suite # 109
Private Bag X1005
Claremont 7735
Cape Town

Get Social