THE DEMAND FOR TOBACCO PRODUCTS AT HOUSEHOLD LEVEL IN PAKISTAN

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1 THE DEMAND FOR TOBACCO PRODUCTS AT HOUSEHOLD LEVEL IN PAKISTAN Submitted by: Hira Qasim Supervisor: Co-Supervisor: Dr.Mehmmood Khalid Mr. Ajmal Jahangeer Department of Health Economics 20 th Nov 2015

2 o o o o o The tobacco consumption is possible by two ways, smoking and chewing. Globally the use of tobacco especially the cigarette consumption has been increasing rapidly since the cigarettes were manufactured at the beginning of 20 th century. Tobacco use in Pakistan is common and one of the highest in South East Asian region (WHO report, 2013). Among few countries of the world, Pakistan is one where smokeless tobacco (chew and raw tobacco) is widely consumed ( 2014 Global Report). The dilemma of tobacco consumption is prevailing around the globe but the ratio of this habit is altered among different nation s i.e. developing and developed countries. The numbers of tobacco consumers are rising and will rise due to the rise in population in the world (WHO, 2002).

3 The use of tobacco is leading preventable cause of death in high income countries where as in low and middle income countries it is increasing day by day (WHO report 2011). According to WHO 2011 report 32.4% males and 5.7% females are current tobacco smokers in Pakistan. According to Coalition for Tobacco Control Pak (CTC), there are 22 million smokers in the country and 55% of the households have at least one individual who smokes tobacco. In Pakistan 1.8% females consumed any smoked tobacco and 4.6% used any smokeless tobacco daily or some days of a week. The large proportion of males was current smokers as 15.2% and among females it was less by 0.4 %( Gilani and Leon, 2012).

4 Source: Sreeramareddy et al, (2014)

5 This study explores the effects of price of tobacco products on the demand for tobacco products in Pakistan. Another objective of this study is to investigate the relationship of the demand for tobacco in terms of different income levels in Pakistan. The socio-economic and demographic determinants of tobacco use in Pakistan.

6 The study tests the following null hypotheses: There is no association of price with tobacco consumption. There is no difference in tobacco consumption by income levels of households. There is no difference in tobacco consumption between educated and uneducated households. Presence of adult males and location in urban areas have no association with tobacco consumption. Other Socio-economic and demographic variables influence the tobacco consumption decisions.

7 The tobacco expenditure is one of the major, especially in cigarette form, portrayed health issues. No research is conducted yet simultaneously with the determinants of tobacco consumption expenditures and the elasticities in the same are not studied at national level including all four provinces. Not only poor consume various forms of tobacco but households who have higher economic status consume more tobacco than lower economic group households. Different tobacco forms are price responsive in Pakistan and taxation could be used as a possible tool of regulating tobacco consumption in Pakistan..

8 The literature review confirms inverse relationship between prices of tobacco products and tobacco consumed. Selvaraj.S, Karan.A, Srivastava.S found in India regarding price elasticity of major tobacco products (cigarettes, bidi and leaf tobacco) by income quintiles. They followed the theoretical framework developed by Deaton ( ). Rijo M John has also found that own-price elasticity estimates of different tobacco products in India ranged between 0.4 to 0.9, with bidis (an indigenous hand-rolled smoked tobacco preparation in India) and leaf tobacco having elasticities close to unity. Another study reflects on the price elasticity of tobacco and shows that, cigarettes prices are an important factor of demand for smoking as well as of smoking participation. According to this study, estimated price elasticity was found (kostova et al. 2012).

9 Another Study in India has revealed that We find that a 10% increase in bidi prices would reduce the demand for bidis by about 6 to 9.5% ( Jha et.al, 2011). Ali Khan Khawaja and Muhammad Masood Kadir, (2004) found in their study that, there is no association between smoking status and different income group. Another study revealed that, the 10% increase in cigarettes prices leads to 4.8% decrease in cigarettes consumption in Pakistan (Mushtaq N, Mushtaq S, and Beebe LA, 2011).

10 Data Pakistan Social Living Standards Measurements (PSLM) survey ( ) The survey is conducted by Federal Bureau of Statistics and provides information on households located across Pakistan.. The data provides information on household characteristics and consumption of various food and non-food items including tobacco products.

11 Does not provide direct information of prices of tobacco products Specific diseases due to tobacco consumption cannot be estimated No information on tobacco spending at individual level, hence individuals characteristics can not be included in the model/analysis.

Unit of Analysis: Household Descriptive analysis: uni-variate and bi-variate analysis, Linear regression ( Ordinary Least Square ) Categories of Tobacco

12 Unit of Analysis: Household Descriptive analysis: uni-variate and bi-variate analysis, Linear regression ( Ordinary Least Square ) Categories of Tobacco Products Cigarettes and Bidi, Chew and raw tobacco Pan prepared Choona khatta and supari etc. Total /Average Tobacco along with socio-economic determinants

13 Dependent Variable : Household consumed tobacco Independent Variables: Age & gender of head of household Number of Adult males in the household Number of Adults in the household Number of youth in the household Education of the head of the household Work status of head of household Household income Illness of the head of the household Region Province Linear regression technique is used to investigate determinants of tobacco consumption.

14 Price Elasticity of Demand % change in quantity demand of a product / % change in price of a product Income Elasticity of Demand % change in quantity demand of a product / % change in income of a product

15 The unit values i.e. prices which have been calculated to estimate the price elasticities for tobacco products, followed Deaton Model (1997). The unit values of each tobacco product namely (Bidi, cigarettes, raw tobacco and pan) are used as proxy for their prices. The formula of unit values: VU= V ( Values) / Quantities (Q) Unit Prices of Q1 ( Quantities consumed and Purchased) in the data.

Conventional Demand Model : Double Log demand model --known as log-log or log linear form Linear Regression Own Price Elasticity is the price elasticity of demand (commonly known as just price

16 Conventional Demand Model : Double Log demand model --known as log-log or log linear form Linear Regression Own Price Elasticity is the price elasticity of demand (commonly known as just price elasticity) measures the rate of response of quantity demanded due to a price change. The formula for the own price elasticity of demand (OPEoD) is: OPEoD = Total % Change in Quantity Demanded Total % Change in Price

17 Data Findings

18 Demographic and Socio- Economic Profiles of Tobacco Consumers Total Households, (100.0%) Tobacco Users households, 7422 (45.4%) Non-Tobacco Users households, 8919 (54.6%)

19 Percentage Distribution of Tobacco Consumers by Gender 2.7% Male Females 97.3%

20 Percentage Distribution of Tobacco users by Age Groups

21 Percentage Distribution of Tobacco users by Educational Status No Education Primary Middle Secondary Intermediate Higher education Others

22 Percentage Distribution of Tobacco users by Income Groups Poorest Poorer Middle Richer Richest

23 Percentage Distribution of Tobacco users by working and non working status Non-Working 15% Working 85%

24 Average Tobacco Consumption per annum (in Rupees) by Age and Gender Household's characteristics on cigarettes,bidi and lighters on chew tobacco and tobacco raw Expendit ures on pan prepared on choona,khaata and supari etc Average Tobacco Gender of the head Males Females Age of the Head and more Chi- Square of Gender = 1.0, Chi- Square of Age = 0.04

25 Household's characteristics on cigarettes and lighters on chew tobacco and tobacco raw on pan prepared on choona,khaata etc Average Tobacco and more Average Tobacco by Numbers of Adult Household's characteristics on cigarettes and lighters on chew tobacco and tobacco raw on pan prepared on choona,khaata etc Average Tobacco and more

26 Household's characterist ics Expenditure s on cigarettes, Lighters and Bidi Expenditure s on chew tobacco and tobacco raw Expenditure s on pan prepared Expenditure s on choona,khaata and Supari etc Average Tobacco Expenditure s and more

27 Household's characteristics on cigarettes, lighters and Bidi on chew tobacco and tobacco raw on pan prepared on choona,khaata and Supari etc Average Tobacco Punjab Sindh Khyber Pakhtunkhwa Baluchistan Household's characteristics on cigarettes, lighters and Bidi on chew tobacco and tobacco raw on pan prepared on choona,khaata and Supari etc Average Tobacco Rural Urban

28 Household's characteristic s on cigarettes, lighters and Bidi on chew tobacco and tobacco raw on pan prepared on choona,khaata and Supri etc Average Tobacco No education Primary Secondary Middle Intermediate Higher education Others

29 Household's characteristic s on cigarettes and Bidi lighters on chew tobacco and tobacco raw on pan prepared on choona,khaata and Supari etc Average Tobacco Poorest Poor Middle Rich Richest

32 Average Unit values/prices of Tobacco Products by Income Quintiles

36 Regression Results

37 Ordinary Least Square Regression of the Determinants of Total Tobacco

39 Own Price and Income Elasticities of Cigarettes and Bidi

43 Explanatory Variables Beta Coefficients T values Significant values Male Head Age (in complete years) Square of head age Number of Adults in the household ** Number of Adult Males in the household Number of youth in the household Primary Middle Secondary *** Intermediate Higher Education *** Others worked status illness in household ** Log of the unit price of cigarettes and Bidi *

44 Log of the Income Level Urban Sindh Khyberpakhton Baluchistan ** Constant *

45 The tobacco consumption is mostly done by males than the females and there was a negative association between age and tobacco consumption. The tobacco expenditures on cigarette, lighters and bidi are high among all socio economic and demographic determinants than other tobacco products. The demand for cigarettes and bidi is price inelastic, chew tobacco is price elastic and pan is inelastic, but the demand for pan is more inelastic than cigarettes and bidi. The income elasticitiy of pan is highly inelastic than the other tobacco products.

46 The policy legislators have implemented the laws on tobacco use but still there needs to take more policy actions. There should be an increase in the price of Pan, Gutka and chalia as well. The advertisement for tobacco use losses should be enhanced. There should not only be a picture on the cigarette packs but banners of the same should also be placed in public places as well. There should be strict vigilance on the supply of tobacco products in all public areas. There should be a strict pricing policy on cigarette consumption; as a result cigarette consumption could be reduced not only among higher income groups but in lower income group as well. There should be a direct taxation imposition on the tobacco industries,

47 It should be carried out with an individual perspective, which will be covered by the analysis on all individuals in the households. This study could be further enhanced by analyzing the estimations of price and income elasticities for income quintiles. The analysis could be done separately at provincial and regional level in Pakistan. The research deals with the various factors but it neglected the tobacco related diseases, so there should some effort in reporting the diseases.

48 Selvaraj.S, Karan.A, Srivastava.S, Price Elasticity of Tobacco Products among Quintile Groups in India, Ali Khan Khawaja and Muhammad Masood Kadir, Smoking among adult males in urban community of Karachi, Pakistan. The Aga Khan University Karachi.vol 35(4). Burki et.al, The Economies of Tobacco and Tobacco Taxation in Pakistan. Coalition for Tobacco Control Pak, Deaton, AS (1997). The Analysis of Household Survey. John Hopkins University press for the World Bank Baltimore. Mushtaq N, Mushtaq S, and Beebe LA (2011). Economics of tobacco control in Pakistan: Estimating elasticities of Cigarettes demand. Tobacco Control, 20(6), Riji M john (2008). Price Elasticies estimates for tobacco products in India. Health policy plan. World Health Organization. Tobacco or health: a global status report.who, Assessment of Economic Costs of Smoking. World Health Organization (2011). Economics of Tobacco Toolkit. WHO/ World Health Statistics, (2013).

49 THANKS

Tobacco & Poverty. Tobacco Use Makes the Poor Poorer; Tobacco Tax Increases Can Change That. Introduction. Impacts of Tobacco Use on the Poor

Tobacco & Poverty. Tobacco Use Makes the Poor Poorer; Tobacco Tax Increases Can Change That. Introduction. Impacts of Tobacco Use on the Poor Policy Brief February 2018 Tobacco & Poverty Tobacco Use Makes the Poor Poorer; Tobacco Tax Increases Can Change That Introduction Tobacco use is the world s leading cause of preventable diseases and premature