Madison Institute for Research on Poverty Discussion Papers

This study analyzes the effectiveness of taxation and anti-smoking publicity in influencing the demand for cigarettes, applying time series analysis to per capita cigarette consumption data in Switzerland between 1954 and 1977. The results suggest that two major publicity campaigns following the publication of the U.S. Surgeon General's Report on Smoking and Health in 1964 caused immediate decreases in cigarette demand by 10 to 13%; more importantly, the two campaigns together appear to have reduced cigarette consumption permanently by 8 to 12%. Publicity also seems to have had important indirect effects, influencing, for example, the price elasticity of cigarette demand. Nominal cigarette price (estimated elasticity values -0.8 to -1.0) turned out to be a better predictor of cigarette demand than real cigarette price (estimated elasticity value -.5). The analysis suggests that publicity accompanying tax induced price increases has had a signal effect on many smokers feeling uncomfortable about their smoking, thereby explaining the reaction of cigarette demand to changes in nominal cigarette price. The study concludes that future , anti-smoking publicity campaigns, supplemented by an appropriate tax policy, may well reduce the demand for cigarettes in Switzerland further. -----------------_.---------Modifying Risk-Taking Behavior through Public Policy: The Case of Cigarette Smoking Recent epidemiological and biomedical research has established smoking as a major risk factor for common disabling or fatal diseases such as lung cancer, ischaemic heart disease, and chronic bronchitis 1 and emphysema. Governments in a number of countries have reacted against smoking by levying special excise taxes on cigarettes, restricting advertising of tobacco products, and initiating or extending antismoking campaigns (health education, publicity campaigns, and legal 2 anti-smoking efforts). The aim of this study is to examine the effectiveness of two instruments that may be used by governments to influence the demand for cigarettes: taxation and anti-smoking publicity. Time series analysis is applied to per capita cigarette consumption data in Switzerland between 1954 and 1977, and a number of hypoth~ses about how taxation and anti-smoking publicity have influenced cigarette demand are tested, controlling for substitution between cigarette, cigar, and pipe smoking. In particular, I focus on long-ter, effects and on interaction between tax and publicity effects to show that anti-smoking publicity did have a substantial permanent impact, and that there are synergistic effects between publicity and taxation. The results provide an important input for cost effectiveness or cost-benefit studies of future government activities designed to reduce smoking. In addition, an extensive review of the relevant research in other countries, particularly in the United States and the United Kingdom, is present ed.