The elasticity of tobacco products in BiH – macrodata analysis
Tobacco consumption continues to be behavior engaged in by a large percentage of Bosnia&Herzegovina (BiH) citizens. According to the official statistics, nearly half of the state’s adults, that is about 1,200,600 people, consume tobacco product on a daily bases. The state excise policy is one of the main available tool for reducing smoking prevalence because the cigarette prices are under direct impact of this policy. The specific excise on cigarettes introduced in BiH in 2009 and have increased every year so it was the main driver of cigarettes price growth. In order to provide research-based evidence for more effective tobacco taxation policies in BIH, in this paper we estimate price elasticity of demand for cigarettes using the macro level data for the period 2008 to 2017, on a semi-annual basis. The results have shown that increase in prices of cigarettes have statistically significant impact on cigarettes consumption, at significance level of 1%. The estimated price elasticity coefficient is in the range from -0.71 to -0.83, depends on the selected control variables used in the model. It means that increase in real cigarettes prices for 10% led to the decrease in cigarettes consumption in the range from 7.1% to 8.3%.