The Determinants of the Demand for Tobacco in Togo

Abstract

This paper analyzes the relationship between the demand for tobacco, its price and the economic factors that may influence it. The objective is to understand the response of consumers to an increase in tobacco prices. The price increase is assumed to be caused by the effect of increasing tobacco taxes, which is a major tobacco control policy. This paper also analyzes the reaction of smokers to an increase in the prices of other goods in the economy. To achieve this objective, we estimate the elasticities of these factors through the tobacco demand models proposed in the literature. The price of tobacco, consumer income per capita, the price of goods such as food and health care, and the strengthening of anti-smoking laws are among the variables used to estimate the demand equations for tobacco. The results of the estimations indicate first that the demand for tobacco is highly elastic with respect to its price; the price elasticity is estimated at -1.368. Tobacco demand is also sensitive to consumer income and the strengthening of anti-smoking laws. In contrast, changes in the prices of other non-addictive goods in the economy, such as food, have no influence on the demand for tobacco products. This means that when the price of other products increases, smokers are likely to reduce the quantity of these products consumed in order to maintain their level of tobacco consumption.

Keywords: Tobacco, Elasticity and Demand

JEL Classification: D11 , D40, I 12