Curbing the Epidemic
Development In Practice
Curbing the Epidemic : Governments and the Economics of Tobacco
(c) 1999 THE WORLD BANK, WASHINGTON D.C.
The International Bank for Reconstruction and Development/THE
WORLD BANK, 1818 H Street, N.W. Washington, D.C. 20433
All rights reserved
Manufactured in the United States of America
First printing May 1999
The findings, interpretations, and conclusions
expressed in this paper are entirely those of the author(s) and should not be attributed
in any manner to the World Bank, to its affiliated organizations, or to members of its
Board of Executive Directors or the countries they represent. The World Bank does not
guarantee the accuracy of the data included in this publication and accepts no
responsibility for any consequence of their use. The material in this publication is
copyrighted. The World Bank encourages dissemination of its work and will normally grant
permission to reproduce portions of the work promptly.
Permission to photocopy items for internal or
personal use, for the internal or personal use of specific clients, or for educational
classroom use is granted by the World Bank, provided that the appropriate fee is paid
directly to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923,
USA.; telephone 978-750-8400, fax 978-750- 4470. Please contact the Copyright Clearance
Center before photocopying items.
For permission to reprint individual articles or
chapters, please fax a request with complete information to the Republication Department,
Copyright Clearance Center, fax 978- 750-4470.
All other queries on rights and
licenses should be addressed to the Office of the Publisher, World Bank, at the address
above or faxed to 202-522-2422. Cover photo: Dr. Joe Losos, Health Canada ISBN
Library of Congress Cataloging-in-Publication Data Jha,
Prabhat, 1965- Curbing the epidemic : governments and the economics of tobacco control /
Prabhat Jha, Frank J. Chaloupka p. cm. - (Development in practice) Includes
bibliographical references. ISBN 0-8213-4519-2
1. Tobacco habit-Government policy. 2.
Tobacco habit-Government policy-Cost effectiveness. I. Chaloupka, Frank J. II. Title. III.
Series: Development in practice (Washington, D.C.) HV5732.J43 1999 363.4-dc21 99-29266
Trends in Tobacco Use
- The Costs and Consequences of Tobacco Control
- Rising consumption in low-income and middle-income countries
- Regional patterns in smoking
- Smoking and socioeconomic status
- Age and the uptake of smoking
- Global patterns of quitting
2. The Health Consequences of
- The addictive nature of tobacco smoking
- The disease burden
- Long delays between exposure and disease
- How smoking kills
- The epidemic varies in place as well as in time
- Smoking and the health disadvantage of the poor
- The risks from others' smoke
- Quitting works
3. Do Smokers Know Their Risks and
Bear Their Costs?
- Awareness of the risks
- Youth, addiction, and the capacity to make sound decisions
- Costs imposed on others
- Appropriate responses for governments
- Dealing with addiction
4. Measures to Reduce the Demand
- Raising cigarette taxes
- Nonprice measures to reduce demand: consumer information, bans
on advertising and promotion, and smoking restrictions
- Nicotine replacement therapy and other cessation interventions
5. Measures to Reduce the Supply of
- The limited effectiveness of most supply-side interventions
- Firm action on smuggling
6. The Costs and Consequences of
- Will tobacco control harm the economy?
- Is tobacco control worth paying for?
7. An Agenda for Action
- Overcoming political barriers to change
- Research priorities
Appendix A Tobacco Taxation: A View From The International
Appendix B Background Papers
Appendix C Acknowledgments
Appendix D The World By Income And Region (World Bank
Figures 1.1 Smoking is increasing
in the developing world 1.2 Smoking is more common among the less educated 1.3 Smoking
starts early in life 2.1 Nicotine levels climb rapidly in young smokers 2.2 Education and
the risk of smoking-attributable death 2.3 Smoking and the widening health gap between the
rich and the poor 4.1 Average cigarette price, tax, and percentage of tax share per pack,
by World Bank income groups, 1996 4.2 As cigarette price rises, consumption falls 4.2.a
Real price of cigarettes and annual cigarette consumption per capita, Canada 1989-1995
4.2.b Real price of cigarettes and annual cigarette consumption per adult (15 years of age
and above), South Africa 1970-1989 4.3 A strong warning label 4.4 Comprehensive
advertising bans reduce cigarette consumption 5.1 Tobacco smuggling tends to rise in line
with the degree of corruption 6.1 As tobacco tax rises, revenue rises too 7.1 Unless
current smokers quit, tobacco deaths will rise dramatically in the next 50 years TABLES
1.1 Regional patterns of smoking 2.1 Current and estimated future deaths from tobacco 4.1
Potential number of smokers persuaded to quit, and lives saved, by a price increase of 10
percent 4.2 Potential number of smokers persuaded to quit, and lives saved, by a package
of nonprice measures 4.3 Effectiveness of various cessation approaches 5.1 The top 30
raw-tobacco-producing countries 6.1 Studies on the employment effects of reduced or
eliminated tobacco consumption 6.2 The cost-effectiveness of tobacco control measures BOXES
1.1 How many young people take up smoking each day? 4.1 Estimating the impact of control
measures on global tobacco consumption: the inputs to the model 4.2 The European Union's
ban on tobacco advertising and promotion 6.1 Help for the poorest farmers 7.1 The World
Health Organization and the Framework Convention for Tobacco Control 7.2 The World Bank's
policy on tobacco
WITH current smoking patterns, about 500 million people alive
today will eventually be killed by tobacco use. More than half of these are now children
and teenagers. By 2030, tobacco is expected to be the single biggest cause of death
worldwide, accounting for about 10 million deaths per year. Increased activity to reduce
this burden is a priority for both the World Health Organization (WHO) and the World Bank
as part of their missions to improve health and reduce poverty. By enabling efforts to
identify and implement effective tobacco control policies, particularly in children, both
organizations would be fulfilling their missions and helping to reduce the suffering and
costs of the smoking epidemic.
Tobacco is different from many other health challenges.
Cigarettes are demanded by consumers and form part of the social custom of many societies.
Cigarettes are extensively traded and profitable commodities, whose production and
consumption have an impact on the social and economic resources of developed and
developing countries alike. The economic aspects of tobacco use are therefore critical to
the debate on its control. However, until recently these aspects have received little
This report aims to help fill that gap. It covers key issues
that most societies and policymakers face when they think about tobacco or its control.
The report is an important part of the partnership between the WHO and the World Bank. The
WHO, the principal international agency on health issues, has taken the lead in responding
to the epidemic with its Tobacco Free Initiative. The World Bank aims to work in
partnership with the lead agency, offering its particular analytic resources in economics.
Since 1991, the World Bank has had a formal policy on tobacco, in recognition of the harm
that it does to health. The policy prohibits the Bank from lending on tobacco and
encourages control efforts.
The report is also timely. In light of the rising death toll
from tobacco, many governments, nongovernmental organizations, and agencies within the
United Nations (UN) system, such as UNICEF and the Food and Agricultural Organization, and
the International Monetary Fund are examining their own policies on tobacco control.
This report draws on many productive collaborations that have
arisen from such reviews at national and international levels. This report is intended
mainly to address the concerns raised by policymakers about the impact of tobacco control
policies on economies. The benefits of tobacco control for health, especially for the
world's children, are clear. There are, however, costs to tobacco control, and
policymakers need to weigh these carefully. In cases where tobacco control policies impose
costs on the poorest in society, governments clearly have a responsibility to help reduce
these costs through, for example, transition schemes for poor tobacco farmers.
Tobacco is among the greatest causes of preventable and
premature deaths in human history. Yet comparatively simple and cost-effective policies
that can reduce its devastating impact are already available. For governments intent on
improving health within the framework of sound economic policies, action to control
tobacco represents an unusually attractive choice.
David de Ferranti Vice President Human Development Network
The World Bank
Jie Chen Executive Director Noncommunicable Diseases World
Report team: This report was prepared by a team led by
Prabhat Jha, and included Frank J. Chaloupka (co-lead), Phyllida Brown, Son Nguyen,
Jocelyn Severino-Marquez, Rowena van der Merwe, and Ayda Yurekli. William Jack, Nicole
Klingen, Maureen Law, Philip Musgrove, Thomas E. Novotny, Mead Over, Kent Ranson, Michael
Walton, and Abdo Yazbeck provided valuable input and advice. This report benefited from
substantive early work on tobacco at the World Bank by Howard Barnum. Input from the World
Health Organization was provided by Derek Yach, and input from the U.S. Centers for
Disease Control and Prevention was provided by Michael Eriksen. The work was carried out
under the general direction of Helen Saxenian, Christopher Lovelace, and David de
Ferranti. Richard Feachem was instrumental in initiating this report. Any errors are the
report team's own.
The production staff of the report included Dan Kagan,
Don Reisman, and Brenda Mejia.
The report benefited greatly from a wide
variety of consultations (see Acknowl-edgments in Appendix C). Support for this report
came from the Human Development Network of the World Bank, the Institute for Social and
Preventive Medicine, Univer-sity of Lausanne, and the Office on Smoking and Health at the
U.S. Centers for Dis-ease Control and Prevention. Their assistance is warmly acknowledged.
THIS report has its origins in the converging efforts of
several partners to address a shared problem: the relative neglect of economic
contributions to the debate on tobacco control. In 1997, at the 10th World Conference on
Tobacco in Beijing, China, the World Bank organized a consultation session on the
economics of tobacco control. The meeting was part of an ongoing review of the Bank's own
policies. There was clear recognition at this meeting that insufficient global attention
was being paid to the economics of the smoking epidemic. The meeting's participants also
agreed that the discipline of economics was not being applied to tobacco control in many
countries, and that even where economic approaches were being used, their methodology was
of variable quality.
At the same time that the World Bank began reviewing its
policies, economists at the University of Cape Town, South Africa, had begun a project on
the economics of tobacco control for Southern Africa. These initiatives were brought
together, in partnership with economists at the University of Lausanne, Switzerland, and
others, to form a wider review. The work culminated in a conference in Cape Town in
February 1998. The proceedings of that conference are published separately.1 The
collaboration led to a broader analysis of the economics of tobacco control, involving
economists and others from a wide range of countries and institutions. Some of the studies
resulting from this analysis will be published shortly.2 This report summarizes the
findings of those studies that are relevant to policymakers.
Notes 1. Abedian, Iraj, R. van der Merwe, N. Wilkins, and P.
Jha. eds. 1998. The Economics of Tobacco Control: Towards an Optimal Policy Mix.
University of Cape Town, South Africa. 2. Tobacco Control Policies in Developing
Countries. Jha, Prabhat and F. Chaloupka, eds. Oxford University Press, forthcoming.
SMOKING already kills one in 10 adults worldwide. By
2030, perhaps a little sooner, the proportion will be one in six, or 10 million deaths per
year-more than any other single cause. Whereas until recently this epidemic of chronic
disease and premature death mainly affected the rich countries, it is now rapidly shifting
to the developing world. By 2020, seven of every 10 people killed by smoking will be in
low- and middle-income nations.
Why this report?
Few people now dispute that smoking is damaging human health
on a global scale. However, many governments have avoided taking action to control smoking
- such as higher taxes, comprehensive bans on advertising and promotion, or restrictions
on smoking in public places-because of concerns that their interventions might have
harmful economic consequences. For example, some policymakers fear that reduced sales of
cigarettes would mean the permanent loss of thousands of jobs; that higher tobacco taxes
would result in lower government revenues; and that higher prices would encourage massive
levels of cigarette smuggling.
This report examines the economic questions that policymakers
must ad-dress when contemplating tobacco control. It asks whether smokers know the risks
and bear the costs of their consumption choices, and explores the options for governments
if they decide that intervention is justified. The report assesses the expected
consequences of tobacco control for health, for economies, and for individuals. It
demonstrates that the economic fears that have deterred policymakers from taking action
are largely unfounded. Policies that reduce the demand for tobacco, such as a decision to
increase tobacco taxes, would not cause long-term job losses in the vast majority of
countries. Nor would higher tobacco taxes reduce tax revenues; rather, revenues would
climb in the medium term. Such policies could, in sum, bring unprecedented health benefits
without harming economies.
About 1.1 billion people smoke worldwide. By 2025, the number
is expected to rise to more than 1.6 billion. In the high-income countries, smoking has
been in overall decline for decades, although it continues to rise in some groups. In low-
and middle-income countries, by contrast, cigarette consumption has been increasing. Freer
trade in cigarettes has contributed to rising consumption in these countries in recent
Most smokers start young. In the high-income countries, about
eight out of 10 begin in their teens. While most smokers in low- and middle-income
countries start in the early twenties, the peak age of uptake in these countries is
falling. In most countries today, the poor are more likely to smoke than the rich.
The health consequences of smoking are twofold. First,
the smoker rapidly becomes addicted to nicotine. The addictive properties of nicotine are
well documented but are often underestimated by the consumer. In the United States,
studies among final-year high school students suggest that fewer than two out of five
smokers who believe that they will quit within five years actually do quit. About seven
out of 10 adult smokers in high-income countries say they regret starting, and would like
to stop. Over decades and as knowledge has increased, the high-income countries have
accumulated a substantial number of former smokers who have successfully quit. However,
individual attempts to quit have low success rates: of those who try without the
assistance of cessation programs, about 98 percent will have started again within a year.
In low- and middle-income countries, quitting is rare.
Smoking causes fatal and disabling disease, and, compared
with other risky behaviors, the risk of premature death is extremely high. Half of all
long-term smokers will eventually be killed by tobacco, and of these, half will die during
productive middle age, losing 20 to 25 years of life. The diseases associated with smoking
are well documented and include cancers of the lung and other organs, ischemic heart
disease and other circulatory diseases, and respiratory diseases such as emphysema. In
regions where tuberculosis is prevalent, smokers also face a greater risk than nonsmokers
of dying from this disease.
Since the poor are more likely to smoke than the rich, their
risk of smoking- related and premature death is also greater. In high- and middle-income
countries, men in the lowest socioeconomic groups are up to twice as likely to die in
middle age as men in the highest socioeconomic groups, and smoking accounts for at least
half their excess risk.
Smoking also affects the health of nonsmokers. Babies born to
smoking mothers have lower birth weights, face greater risks of respiratory disease, and
are more likely to die of sudden infant death syndrome than babies born to nonsmokers.
Adult nonsmokers face small but increased risks of fatal and disabling disease from
exposure to others' smoke.
Do smokers know their risks and bear their costs?
Modern economic theory holds that consumers are usually the
best judges of how to spend their money on goods and services. This principle of consumer
sovereignty is based on certain assumptions: first, that the consumer makes rational and
informed choices after weighing the costs and benefits of purchases, and, second, that the
consumer incurs all costs of the choice. When all consumers exercise their sovereignty in
this way-knowing their risks and bearing their costs-then society's resources are, in
theory, allocated as efficiently as possible. This report examines consumers' incentives
to smoke, asks whether their choice to do so is like other consumption choices, and
whether it results in an efficient allocation of society's resources, before discussing
the implications for governments.
Smokers clearly perceive benefits from smoking, such as
pleasure and the avoidance of withdrawal, and weigh these against the private costs of
their choice. Defined this way, the perceived benefits outweigh the perceived costs,
otherwise smokers would not pay to smoke. However, it appears that the choice to smoke may
differ from the choice to buy other consumer goods in three specific ways.
First, there is evidence that many smokers are not fully
aware of the high risks of disease and premature death that their choice entails. In low-
and middle-income countries, many smokers may simply not know about these risks. In China
in 1996, for example, 61 percent of smokers questioned thought that tobacco did them
"little or no harm." In high-income countries, smokers know they face increased
risks, but they judge the size of these risks to be lower and less well established than
do nonsmokers, and they also minimize the personal relevance of these risks.
Second, smoking is usually started in adolescence or early
adulthood. Even when they have been given information, young people do not always have the
capacity to use it to make sound decisions. Young people may be less aware than adults of
the risk to their health that smoking poses. Most new recruits and would-be smokers also
underestimate the risk of becoming addicted to nicotine. As a result, they seriously
underestimate the future costs of smoking- that is, the costs of being unable in later
life to reverse a youthful decision to smoke. Societies generally recognize that
adolescent decision-making capacity is limited, and restrict young people's freedom to
make certain choices, for example, by denying them the right to vote or to marry until a
certain age. Likewise, societies may consider it valid to restrict young people's freedom
to choose to become addicted to smoking, a behavior that carries a much greater risk of
eventual death than most other risky activities in which young people engage.
Third, smoking imposes costs on nonsmokers. With some of
their costs borne by others, smokers may have an incentive to smoke more than they would
if they were bearing all the costs themselves. The costs to nonsmokers clearly include
health damage as well as nuisance and irritation from exposure to environmental tobacco
smoke. In addition, smokers may impose financial costs on others. Such costs are more
difficult to identify and quantify, and are variable in place and time, so it is not yet
possible to determine how they might affect individuals' incentives to smoke more or less.
However, we briefly discuss two such costs, healthcare and pensions.
In high-income countries, smoking-related healthcare accounts
for be-tween 6 and 15 percent of all annual healthcare costs. These figures will not
necessarily apply to low- and middle-income countries, whose epidemics of smoking-related
diseases are at earlier stages and may have other qualitative differences. Annual costs
are of great importance to governments but, for individual consumers, the key question is
the extent to which the costs will be borne by themselves or by others.
In any given year, smokers' healthcare costs will on average
exceed non-smokers'. If healthcare is paid for to some extent by general public taxation,
nonsmokers will thus bear a part of the smoking population's costs. However, some analysts
have argued that, because smokers tend to die earlier than non-smokers, their lifetime
healthcare costs may be no greater, and possibly even smaller, than nonsmokers'. This
issue is controversial, but recent reviews in high-income countries suggest that smokers'
lifetime costs are, after all, some-what higher than nonsmokers', despite their shorter
lives. However, whether higher or lower, the extent to which smokers impose their costs on
others will depend on many factors, such as the existing level of cigarette taxes, and how
much healthcare is provided by the public sector. In low- and middle-income countries,
meanwhile, there have been no reliable studies of these issues.
The question of pensions is equally complex. Some analysts in
high-in-come countries have argued that smokers "pay their way" by contributing
to public pension schemes and then dying earlier, on average, than nonsmokers. However,
this question is irrelevant to the low- and middle-income countries where most smokers
live, because public pension coverage in these countries is low.
In sum, smokers certainly impose some physical costs,
including health damage, nuisance, and irritation, on nonsmokers. They may also impose
financial costs, but the scope of these is still unclear.
It appears unlikely, then, that most smokers either know
their full risks or bear the full costs of their choice. Governments may consider that
intervention is therefore justified, primarily to deter children and adolescents from
smoking and to protect nonsmokers, but also to give adults all the information they need
to make an informed choice.
Governments' interventions should ideally remedy each
identified prob-lem specifically. Thus, for example, children's imperfect judgments about
the health effects of smoking would most specifically be addressed by improving their
education and that of their parents, or by restricting their access to cigarettes. But
adolescents respond poorly to health education, perfect parents are rare, and existing
forms of restriction on cigarette sales to the young do not work, even in the high-income
countries. In reality, the most effective way to deter children from taking up smoking is
to increase taxes on tobacco. High prices prevent some children and adolescents from
starting and encourage those who already smoke to reduce their consumption.
Taxation is a blunt instrument, however, and if taxes on
cigarettes are raised, adult smokers will tend to smoke less and pay more for the
cigarettes that they do purchase. In fulfilling the goal of protecting children and
adolescents, taxation would thus also be imposing costs on adult smokers. These costs
might, however, be considered acceptable, depending upon how much societies value curbing
consumption in children. In any case, one long-term effect of reducing adult consumption
may be to further discourage children and adolescents from smoking.
The problem of nicotine addiction would also need to be
addressed. For established smokers who want to quit, the cost of withdrawal from nicotine
is considerable. Governments might consider interventions to help reduce those costs as
part of the overall tobacco control package.
Measures to reduce the demand for tobacco
We turn now to a discussion of measures for tobacco control,
evaluating each in turn.
Evidence from countries of all income levels shows that price
increases on cigarettes are highly effective in reducing demand. Higher taxes induce some
smokers to quit and prevent other individuals from starting. They also reduce the number
of ex-smokers who return to cigarettes and reduce consumption among continuing smokers. On
average, a price rise of 10 percent on a pack of cigarettes would be expected to reduce
demand for cigarettes by about 4 percent in high-income countries and by about 8 percent
in low- and middle-income countries, where lower incomes tend to make people more
responsive to price changes. Children and adolescents are more responsive to price rises
than older adults, so this intervention would have a significant impact on them.
Models for this report show that tax increases that would
raise the real price of cigarettes by 10 percent worldwide would cause 40 million smokers
alive in 1995 to quit, and prevent a minimum of 10 million tobacco-related deaths. The
price rise would also deter others from taking up smoking in the first place. The
assumptions on which the model is based are deliberately conservative, and these figures
should therefore be regarded as minimum estimates.
As many policymakers are aware, the question of what the
right level of tax should be is a complex one. The size of the tax depends in subtle ways
on empirical facts that may not yet be available, such as the scale of the costs to
nonsmokers and income levels. It also depends on varying societal values, such as the
extent to which children should be protected, and on what a society hopes to achieve
through the tax, such as a specific gain in revenue or a specific reduction in disease
burden. The report concludes that, for the time being, policymakers who seek to reduce
smoking should use as a yardstick the tax levels adopted as part of the comprehensive
tobacco control policies of countries where cigarette consumption has fallen. In such
countries, the tax component of the price of a pack of cigarettes is between two-thirds
and four-fifths of the retail cost. Currently, in the high-income countries, taxes average
about two-thirds or more of the retail price of a pack of cigarettes. In lower-income
countries taxes amount to not more than half the retail price of a pack of cigarettes.
Nonprice measures to reduce demand
Beyond raising the price, governments have also employed a
range of other effective measures. These include comprehensive bans on advertising and
pro-motion of tobacco; information measures such as mass media counter-advertising,
prominent health warning labels, the publication and dissemination of research findings on
the health consequences of smoking as well as restrictions on smoking in work and public
This report provides evidence that each of these measures can
reduce the demand for cigarettes. For example, "information shocks," such as the
publication of research studies with significant new information on the health effects of
smoking, reduce demand. Their effect appears to be greatest when a population has
relatively little general awareness of the health risks. Comprehensive bans on advertising
and promotion can reduce demand by around 7 percent, according to econometric studies in
high-income countries. Smoking restrictions clearly benefit nonsmokers, and there is also
some evidence that restrictions can reduce the prevalence of smoking.
Models developed for this report suggest that, employed as a
package, such nonprice measures used globally could persuade some 23 million smokers alive
in 1995 to quit and avert the tobacco-attributable deaths of 5 million of them. As with
the estimates for tax increases, these are conservative estimates.
Nicotine replacement and other cessation therapies
A third intervention would be to help those who wish to quit
by making it easier for them to obtain nicotine replacement therapy (NRT) and other
cessation interventions. NRT markedly increases the effectiveness of cessation efforts and
also reduces individuals' withdrawal costs. Yet in many countries, NRT is difficult to
obtain. Models for this study suggest that if NRT were made more widely available, it
could help to reduce demand substantially.
The combined effect of all these demand-reducing measures is
not known, since smokers in most countries with tobacco control policies are exposed to a
mixture of them and none can be studied strictly in isolation. However, there is evidence
that the implementation of one intervention supports the success of others, underscoring
the importance of implementing tobacco controls as a package. Together, in sum, these
measures could avert many millions of deaths.
Measures to reduce the supply of
While interventions to reduce demand for tobacco are likely
to succeed, measures to reduce its supply are less promising. This is because, if one
supplier is shut down, an alternative supplier gains an incentive to enter the market.
The extreme measure of prohibiting tobacco is unwarranted on
economic grounds as well as unrealistic and likely to fail. Crop substitution is often
pro-posed as a means to reduce the tobacco supply, but there is scarcely any evidence that
it reduces consumption, since the incentives to farmers to grow tobacco are currently much
greater than for most other crops. While crop substitution is not an effective way to
reduce consumption, it may be a useful strategy where needed to aid the poorest tobacco
farmers in transition to other livelihoods, as part of a broader diversification program.
Similarly, the evidence so far suggests that trade
restrictions, such as import bans, will have little impact on cigarette consumption
worldwide. In-stead, countries are more likely to succeed in curbing tobacco consumption
by adopting measures that effectively reduce demand and applying those measures
symmetrically to imported and domestically produced cigarettes. Likewise, in a framework
of sound trade and agriculture policies, the subsidies on tobacco production that are
found mainly in high-income countries make little sense. In any case, their removal would
have little impact on total retail price.
However, one supply-side measure is key to an effective
strategy for tobacco control: action against smuggling. Effective measures include
prominent tax stamps and local-language warnings on cigarette packs, as well as the
aggressive enforcement and consistent application of tough penalties to deter smugglers.
Tight controls on smuggling improve governments' revenue yields from tobacco tax
The costs and consequences of tobacco control
Policymakers traditionally raise several concerns about
acting to control tobacco. The first of these concerns is that tobacco controls will cause
permanent job losses in an economy. However, falling demand for tobacco does not mean a
fall in a country's total employment level. Money that smokers once spent on cigarettes
would instead be spent on other goods and services, generating other jobs to replace any
lost from the tobacco industry. Studies for this report show that most countries would see
no net job losses, and that a few would see net gains, if tobacco consumption fell.
There are however a very small number of countries, mostly in
Sub-Saharan Africa, whose economies are heavily dependent on tobacco farming. For these
countries, while reductions in domestic demand would have little impact, a global fall in
demand would result in job losses. Policies to aid adjustment in such circumstances would
be essential. However, it should be stressed that, even if demand were to fall
significantly, it would occur slowly, over a generation or more.
A second concern is that higher tax rates will reduce
government revenues. In fact, the empirical evidence shows that raised tobacco taxes bring
greater tobacco tax revenues. This is in part because the proportionate reduction in
demand does not match the proportionate size of the tax increase, since addicted consumers
respond relatively slowly to price rises. A model developed for this study concludes that
modest increases in cigarette excise taxes of 10 percent worldwide would increase tobacco
tax revenues by about 7 percent overall, with the effects varying by country.
A third concern is that higher taxes will lead to massive
increases in smuggling, thereby keeping cigarette consumption high but reducing government
revenues. Smuggling is a serious problem, but the report concludes that, even where it
occurs at high rates, tax increases bring greater revenues and reduce consumption.
Therefore, rather than foregoing tax increases, the appropriate response to smuggling is
to crack down on criminal activity.
A fourth concern is that increases in cigarette taxes will
have a disproportionate impact on poor consumers. Existing tobacco taxes do consume a
higher share of the income of poor consumers than of rich consumers. However,
policymakers' main concern should be over the distributional impact of the entire tax and
expenditure system, and less on particular taxes in isolation. It is important to note
that poor consumers are usually more responsive to price increases than rich consumers, so
their consumption of cigarettes will fall more sharply following a tax increase, and their
relative financial burden may be correspondingly reduced. Nonetheless, their loss of
perceived benefits of smoking may be comparatively greater.
Is tobacco control worth paying for?
For governments considering intervention, an important
further consideration is the cost-effectiveness of tobacco control measures relative to
other health interventions. Preliminary estimates were performed for this report in which
the public costs of implementing tobacco control programs were weighed against the
potential number of healthy years of life saved. The results are consistent with earlier
studies that suggest that tobacco control is highly cost-effective as part of a basic
public health package in low- and middle-income countries.
Measured in terms of the cost per year of healthy life saved,
tax increases would be cost-effective. Depending on various assumptions, this instrument
could cost between US$5 and $17 1 for each year of healthy life saved in low-and
middle-income countries. This compares favorably with many health interventions commonly
financed by governments, such as child immunization. Nonprice measures are also
cost-effective in many settings. Measures to liberalize access to nicotine replacement
therapy, for example, by changing the conditions for its sale, would probably also be
cost-effective in most settings. However, individual countries would need to make careful
assessments before deciding to provide subsidies for NRT and other cessation interventions
for poor smokers.
The unique potential of tobacco taxation to raise revenues
cannot be ignored. In China, for example, conservative estimates suggest that a 10 percent
increase in cigarette tax would decrease consumption by 5 percent, increase revenue by 5
percent, and that the increase would be sufficient to finance a package of essential
health services for one-third of China's poorest 100 mil-lion citizens.
An agenda for action
Each society makes its own decisions
about policies that concern individual choices. In reality, most policies would be based
on a mix of criteria, not only economic ones. Most societies would wish to reduce the
unquantifiable suffering and emotional losses wrought by tobacco's burden of disease and
premature death. For the policymaker seeking to improve public health, too, tobacco
control is an attractive option. Even modest reductions in a disease burden of such large
size would bring highly significant health gains.
Some policymakers will consider that the strongest grounds
for intervening are to deter children from smoking. However, a strategy aimed solely at
deterring children is not practical and would bring no significant benefits to public
health for several decades. Most of the tobacco-related deaths that are projected to occur
in the next 50 years are among today's existing smokers. Governments concerned with health
gains in the medium term may therefore consider adopting broader measures that also help
adults to quit.
The report has two recommendations:
1. Where governments decide to take strong action to curb the
tobacco epidemic, a multi-pronged strategy should be adopted. Its aims should be to deter
children from smoking, to protect nonsmokers, and to provide all smokers with information
about the health effects of tobacco. The strategy, tailored to individual country needs,
would include: (1) raising taxes, using as a yardstick the rates adopted by countries with
comprehensive tobacco control policies where consumption has fallen. In these countries,
tax accounts for two-thirds to four-fifths of the retail price of cigarettes; (2)
publishing and disseminating research results on the health effects of tobacco, adding
prominent warning labels to cigarettes, adopting comprehensive bans on advertising and
promotion, and restricting smoking in workplaces and public places; and (3) widening
access to nicotine replacement and other cessation therapies.
2. International organizations such as the UN agencies should
review their existing programs and policies to ensure that tobacco control is given due
prominence; they should sponsor research into the causes, consequences, and costs of
smoking, and the cost-effectiveness of interventions at the local level; and they should
address tobacco control issues that cross borders, including working with the WHO's
proposed Framework Convention for Tobacco Control. Key areas for action include
facilitating international agreements on smuggling control, discussions on tax
harmonization to reduce the incentives for smuggling, and bans on advertising and
promotion involving the global communications media.
The threat posed by smoking to global health is
unprecedented, but so is the potential for reducing smoking-related mortality with
cost-effective policies. This report shows the scale of what might be achieved: moderate
action could ensure substantial health gains for the 21st century.
1. All dollar amounts are current U.S. dollars.