Post on 22-Aug-2021
Curbing the EpidemicGovernments and the Economics of Tobacco Control
Curbing the EpidemicGovernments and the Economics of Tobacco Control
The World BankThe World BankPresented by Prabhat Jha, on behalf of the Report team and the HumanPresented by Prabhat Jha, on behalf of the Report team and the Human
Development NetworkDevelopment Network
Why did the World Bank produce this report?Why did the World Bank produce this report?Economic arguments for, or against, tobacco control areEconomic arguments for, or against, tobacco control are
unclear and often debatedunclear and often debated
nn In 1957In 1957, British Chancellor of the Exchequer warned of, British Chancellor of the Exchequer warned of“the enormous contribution to the Exchequer from tobacco“the enormous contribution to the Exchequer from tobaccoduties and the serious effect on the Commonwealth...that aduties and the serious effect on the Commonwealth...that acampaign against smoking would have”campaign against smoking would have”
nn In 1996In 1996, an Asian Health Minister stated “cigarette, an Asian Health Minister stated “cigaretteproducers are making large contributions to our economy...producers are making large contributions to our economy...we have to think about workers and tobacco farmers”we have to think about workers and tobacco farmers”
Source: Pollock 1996, Tobacco Control 1996, The Economist 1997Source: Pollock 1996, Tobacco Control 1996, The Economist 1997
MethodologyMethodology
nn Consultation workshopsConsultation workshops: : Washington D.C.Washington D.C.1996, Beijing 1997, Cape Town 19981996, Beijing 1997, Cape Town 1998uu Proceedings publishedProceedings published
nn Background papers (17):Background papers (17): “Tobacco Control in“Tobacco Control inDeveloping Countries”, Oxford University PressDeveloping Countries”, Oxford University Pressuu Reviews of literatureReviews of literatureuu New ResearchNew Research
Outline of ReportOutline of Report
nnWhy intervene to control smoking?Why intervene to control smoking?nnWhich interventions are effective andWhich interventions are effective and
which are not?which are not?nnWhat are the costs of tobacco control?What are the costs of tobacco control?nn Key recommendationsKey recommendations
Why should governments intervene?Large and growing number of deaths from smokingWhy should governments intervene?
Large and growing number of deaths from smoking
World: Annual Tobacco deaths (in millions)World: Annual Tobacco deaths (in millions)
Source: Peto, Lopez, and others 1997; WDR 1993
2000 2030Developed 2 ~3Developing ~2 ~7World Total 4 ~10
u1 in 2 of long-term smokers killed by their addictionu1/2 of deaths in middle age (35-69)
Smoking is more common among the less educated
Smoking prevalence among men inChennai, India, by education levels
Smoking is more common among the less educated
Smoking prevalence among men inChennai, India, by education levels
Source: Gajalakshmi and others, background paper
64%58%
42%
21%
0%
20%
40%
60%
Il l i terate < 6 y e a r s 6-12yea r s
>12yea r s
L e n g t h o f s c h o o l i n g
Sm
okin
g pr
eval
ence
Smoking accounts for much of the mortality gapbetween rich and poor
Risk of death of a 35 year old male before age 70, by educationlevels in Poland 1996
Smoking accounts for much of the mortality gapbetween rich and poor
Risk of death of a 35 year old male before age 70, by educationlevels in Poland 1996
Source: Bobak and others, background paper; Jha and others 1999
5% 9%19%1%
1%
5%
21%22%
28%
0%
10%
20%
30%
40%
50%
60%
Higher Secondary Primary
Other causes
Attributed to SMOKINGbut would have diedanyway at ages 35-69Attributed to SMOKING
Why should governments intervene?Economic rationale or “market failures”
Why should governments intervene?Economic rationale or “market failures”nn Smokers do not know their risksSmokers do not know their risksnn Addiction and youth onset of smokingAddiction and youth onset of smokinguu Lack of information and unwillingness toLack of information and unwillingness to
act on informationact on informationuu Regret habit later, but many addictedRegret habit later, but many addicted
nn Costs imposed on othersCosts imposed on othersuu Costs of environmental tobacco smokeCosts of environmental tobacco smoke
and health costsand health costs
Tobacco addiction starts early in lifeTobacco addiction starts early in life
Source: Chinese Academy of Medicine 1997, Gupta 1996, US Surgeon General Reports, 1989 and 1994,Authors’ calculations
nn Every day 80,000 to 100,000 youthsEvery day 80,000 to 100,000 youthsbecome regular smokersbecome regular smokers
C h i n a (males,1996)
I n d i a (males, 1995)
U S (both sexes,
born 1952-61)
U S (both sexes,
born 1910-14)
0
20
40
60
80
100
15 20 25
Age
Cum
ulat
ive
upta
ke in
per
cent
Health costs from smokingHealth costs from smokingnn Annual costs are about 6 to 15 percent ofAnnual costs are about 6 to 15 percent of
total health costs in high-income countriestotal health costs in high-income countriesuu Differences in lifetime costs are smaller thanDifferences in lifetime costs are smaller than
annual costsannual costsuu Short-term cost escalationShort-term cost escalation
nn “Smokers pay their way” arguments are“Smokers pay their way” arguments arecomplex, and often misusedcomplex, and often misuseduu Low pension coverage in low/middle income Low pension coverage in low/middle income
countriescountries
Government roles in interveningGovernment roles in intervening
nn To deter children from smokingTo deter children from smokingnn To protect non-smokers from others’ smokeTo protect non-smokers from others’ smokenn To provide adults the needed information toTo provide adults the needed information to
make an informed choicemake an informed choiceuu First-best instrument, such as youth restrictions,First-best instrument, such as youth restrictions,
are usually ineffective. Thus, tax increases areare usually ineffective. Thus, tax increases arejustified, and are effective.justified, and are effective.
uu Tax increases are blunt instruments.Tax increases are blunt instruments.
Unless current smokers quit, smoking deathswill rise dramatically over the next 50 years
Unless current smokers quit, smoking deathswill rise dramatically over the next 50 years
0
340
520
70
500
220
190
0
100
200
300
400
500
1950 2000 2025 2050
Year
Toba
cco d
eath
s (mi
llion)
Baseline
If proportion ofyoung adultstaking up smokinghalves by 2020
If adultconsumptionhalves by 2020
Source: Peto and others, 1994; Peto, personal communication.
Which interventions are effective?Measures to reduce demand
Which interventions are effective?Measures to reduce demand
nn Higher cigarette taxesHigher cigarette taxesnn Non-price measuresNon-price measures: consumer: consumer
information, research, cigarette advertisinginformation, research, cigarette advertisingand promotion bans, warning labels andand promotion bans, warning labels andrestrictions on public smokingrestrictions on public smoking
nn Increased access to nicotine replacementIncreased access to nicotine replacement(NRT) and other cessation therapies(NRT) and other cessation therapies
Taxation is the most effective measureTaxation is the most effective measure
nn Higher taxes induce quitting and preventHigher taxes induce quitting and preventstartingstarting
nn A 10% price increase reduces demand by:A 10% price increase reduces demand by:uu 4% in high-income countries4% in high-income countriesuu 8% in low or middle-income countries8% in low or middle-income countries
nn Young people and the poor are the mostYoung people and the poor are the mostprice responsiveprice responsive
Cigarette price and consumption go inopposite trends
Real price of cigarettes and annual per adult cigarette consumption in South Africa1970-1989
Cigarette price and consumption go inopposite trends
Real price of cigarettes and annual per adult cigarette consumption in South Africa1970-1989
Source: Saloojee 1995
0.05
0.06
0.07
0.08
0.09
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988
Year
Cig
aret
te c
onsu
mpt
ion
per
adul
t (in
pac
ks)
0.7
0.8
0.9
1
1.1
1.2
1.3
Rea
l Pri
ce
Real price
Consumptionper adult
What is the “right” level of tax?What is the “right” level of tax?
nn Complex questionComplex questionuu Depends on various factors, degree to which Depends on various factors, degree to which
society wishes to protect children, revenuesociety wishes to protect children, revenueconsiderations, etc.considerations, etc.
nn Useful yardstick: where comprehensiveUseful yardstick: where comprehensiveprograms used, tax is at least 2/3 to 4/5 ofprograms used, tax is at least 2/3 to 4/5 ofretail price.retail price.
Cigarette tax levels are lower inlow or middle-income countriesCigarette tax levels are lower inlow or middle-income countries
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
High Income Upper MiddleIncome
Lower MiddleIncome
Low Income
Countries by income
Aver
age
pric
e or
tax
per p
ack
(US$
)
0
10
20
30
40
50
60
70
80
Tax
as a
per
cent
age
of p
rice
Average price in US$Average tax in US$Tax as a percentage of price
Source: Authors’ calculations
Non-price measures to reduce demandNon-price measures to reduce demand
nn Increase consumer informationIncrease consumer information::dissemination of research findings, warningdissemination of research findings, warninglabels, counter-advertisinglabels, counter-advertising
nn Comprehensive ban on advertising andComprehensive ban on advertising andpromotionpromotion
nn Restriction on smoking in public and workRestriction on smoking in public and workplacesplaces
Comprehensive advertising bans reduce cigarette consumption Consumption trends in countries with such bans vs. those with no bans
(n=102 countries)
Comprehensive advertising bans reduce cigarette consumption Consumption trends in countries with such bans vs. those with no bans
(n=102 countries)
No Ban
Ban
1450
1500
1550
1600
1650
1700
1750
1981 1991
Year
Cig
aret
te c
onsu
mpt
ion
per
capi
ta
Source: Saffer, background paper
Potential impact of a price increase of 10%and a package of non-price measures
Potential impact of a price increase of 10%and a package of non-price measures
Region Change in number ofsmokers (millions)
Change in number ofdeaths (millions)
Priceincreases
Non-pricemeasures
Priceincreases
Non-pricemeasures
Low/MiddleIncome
-36 -19 -9 -4
HighIncome
-4 -4 -1 -1
World -40 -23 -10 -5
Source: Ranson and others, background paper
NRT and cessation therapiesNRT and cessation therapies
nn NRTs double the effectiveness of cessationNRTs double the effectiveness of cessationefforts and reduce individuals’ withdrawal costsefforts and reduce individuals’ withdrawal costs
nn Governments may widen access to NRT andGovernments may widen access to NRT andother cessation therapies by:other cessation therapies by:
uu Reducing regulationReducing regulationuu Conducting more studies on cost-effectivenessConducting more studies on cost-effectiveness
(especially in low/middle income countries)(especially in low/middle income countries)uu Considering NRT subsidies for poorest smokersConsidering NRT subsidies for poorest smokers
Which interventions are ineffective atreducing consumption?
Most measures to reduce supply
Which interventions are ineffective atreducing consumption?
Most measures to reduce supply
nn ProhibitionProhibitionnn Youth access restrictionsYouth access restrictionsnn Crop substitutionCrop substitutionnn Trade restrictionsTrade restrictionsnn Control of smuggling is the only exceptionControl of smuggling is the only exception
and it is the key supply-side measureand it is the key supply-side measure
What are the costs of tobacco control?What are the costs of tobacco control?
nn Revenue lossRevenue loss: : likely to have revenue gainslikely to have revenue gainsuu a 10% tax increase would raise revenue by 7%a 10% tax increase would raise revenue by 7%
nn Job lossJob loss: : temporary, minimal and gradualtemporary, minimal and gradual
nn Possible smugglingPossible smuggling: : crack down on criminalcrack down on criminalactivity, not lower taxesactivity, not lower taxes
nn Cost to individuals, especially the poor:Cost to individuals, especially the poor:partially offset by lower consumptionpartially offset by lower consumption
As tobacco tax rises, revenue rises tooReal price and tobacco revenues in the U.K., 1971-1995
As tobacco tax rises, revenue rises tooReal price and tobacco revenues in the U.K., 1971-1995
6000
6500
7000
7500
8000
8500
9000
1971 1974 1977 1980 1983 1986 1989 1992 1995
Year
Taxa
tion
reve
nue
(in m
iilio
n of
pou
nd s
terl
ing)
£ 1.40
£ 1.60
£ 1.80
£ 2.00
£ 2.20
£ 2.40
£ 2.60
£ 2.80
£ 3.00
Pri
ce (
in 1
994
poun
d st
erlin
g)
TAX REVENUE
PRICE
Source: Townsend 1998
Studies on the employment effects of dramaticallyreduced or eliminated tobacco consumption
Studies on the employment effects of dramaticallyreduced or eliminated tobacco consumption
Type of country Name and year Net change as %of economy in base
year givenNet Exporters US (1993) 0%
UK (1990) +0.5%
Zimbabwe (1980) -12.4%
Balanced TobaccoEconomies
South Africa (1995) +0.4%
Scotland (1989) +0.3%
Net Importers Bangladesh (1994) +18.7%
Source:Buck and others, 1995; Irvine and Sims, 1997; McNicoll and Boyle 1992, van der Merwe and others, background paper; Warner and others 1996
How cost-effective are tobacco controlmeasures?
US dollars per DALY saved
How cost-effective are tobacco controlmeasures?
US dollars per DALY savedRegion Price
increases of10%
Non-pricemeasures
witheffectiveness
of 5%
NRT(publiclyprovided)with 25%coverage
Low / middleincome
4 to 17 68 to 272 276 to 297
High Income 161 to 645 1,347 to5,388
746 to 1,160
Note: 3% discount rate, costs for non-price measures and all benefits projected over 30 yearsSource: Ranson and others, background paper
SummarySummarynn Tobacco deaths worldwide are large and growing,Tobacco deaths worldwide are large and growing,
and have higher burdens in the poorand have higher burdens in the poor
nn Specific market failures support governmentSpecific market failures support governmentinterventionintervention
nn Demand measures, chiefly tax increases,Demand measures, chiefly tax increases,information, and regulation are most effective toinformation, and regulation are most effective toreduce consumptionreduce consumption
nn Control of smuggling is the major supply-sideControl of smuggling is the major supply-sideinterventionintervention
nn Tobacco control is cost-effectiveTobacco control is cost-effective
Key recommendationsKey recommendationsnn GovernmentsGovernments:: adopt multi-pronged strategy,adopt multi-pronged strategy,
tailored to each countrytailored to each countryuu cigarette tax increases: 2/3 to 4/5 of retail pricecigarette tax increases: 2/3 to 4/5 of retail priceuu consumer information, research, advertising andconsumer information, research, advertising and
promotion bans, warning labels and restrictions onpromotion bans, warning labels and restrictions onpublic smokingpublic smoking
uu widen access to NRT and other cessation therapieswiden access to NRT and other cessation therapies
nn International agenciesInternational agencies:: review policies,review policies,sponsor research, address cross-border issuessponsor research, address cross-border issuesand support the FCTCand support the FCTC