The Demand for Cigarettes in Taiwan: Domestic versus Imported Cigarettes

This paper uses annual time series data from Taiwan to empirically estimate the demand for cigarettes, in consideration of the import liberation of foreign cigarettes and of anti-smoking campaigns. The results indicate that the price elasticities for domestic and imported cigarettes are -0.6 and -1.1, respectively. The cross-price elasticities are 0.08 for domestic and 2.78 for imported cigarettes. The spread of cigarette health information has had a significantly negative effect on cigarette consumption. In addition, our analysis offers mild support to the argument that opening the markets to imported cigarettes has resulted in significant increases in overall cigarette consumption. JEL Classification: D12, I18 ___________________ * The Associate Research Fellow, the Institute of Economics, Academia Sinica, Taipei, Taiwan **Professor of Health Economics, University of California, Berkeley, CA ***Associate Professor of Economics, National Taiwan University, Taipei, Taiwan