Off-premises demand elasticities for pure alcohol in five Latin American countries: The case of Argentina, Chile, Costa Rica, Honduras, and Uruguay.

BACKGROUND AND AIMS: There is ample evidence from high-income countries that fiscal policies such as alcohol taxes can affect the consumption of alcohol by increasing alcohol prices. In the case of Latin American countries, much less is known about how sensitive alcohol demand is to alcohol price changes. This study aims to expand the evidence base on the sensitivity of off-premises pure alcohol demand to price and expenditure increases in five Latin American countries: Argentina, Chile, Costa Rica, Honduras, and Uruguay, which have different socioeconomic profiles and alcohol consumption patterns. DESIGN AND SETTING: Cross-sectional study MEASUREMENTS: The price and expenditure elasticities were estimated using an Almost Ideal Demand System (AIDS). Own price and expenditure elasticities for off-premises pure alcohol were estimated using representative household surveys, which collect data on households' expenses to construct the consumer basket of goods and services used to calculate the consumer price index (CPI) for the country. FINDINGS: Own price elasticities of off-premises pure alcohol for all countries were negative, inelastic, and significant at 1 %. They were -0.418 for Argentina; -0.656 for Chile; and for Costa Rica, Honduras, and Uruguay, they were equal to -0.608, -0.509, and -0.32, respectively. Expenditure elasticities were positive and significant at 1 %, except for Costa Rica, which was significant at 10 %. They were equal to 0.865 in Argentina; 0.943 in Chile; 1.182 in Costa Rica; 0.874 in Honduras; and 0.857 in Uruguay. Elasticities for Costa Rica should be interpreted cautiously, as there is insufficient geographical price variability to identify the demand correctly. CONCLUSIONS: Results were consistent with previous literature for countries from other regions. Governments should expand this study to measure total demand elasticities to improve the design of alcohol tax policies.

Price and expenditure elasticity of cigarette demand in El Salvador: a household-level analysis and simulation of a tax increase.

BACKGROUND: In El Salvador, 8.8% of adults 15 years and older smoke cigarettes. Little is known about the sensitivity of cigarette consumption among the adults in El Salvador to tax and price increases and income growth. METHODS: Elasticities are estimated using Deaton's Almost Ideal Demand System model applied to data from the National Household Income and Expenditure Survey 2005/2006 for the total population and separately for income groups. The estimates are then used to simulate the effects of a proposed change in tobacco tax policy on cigarette consumption and tax revenue. FINDINGS: The estimated price elasticities (-0.77 for the total population) are within the range of price elasticity estimates available for low and middle-income countries. Given the estimated elasticities, a tobacco tax increase is expected to reduce the number of smokers (by almost 20%) and increase tobacco tax revenue (by more than 50%). CONCLUSIONS: Increasing tobacco taxes has the potential to decrease consumption in El Salvador and raise fiscal revenues. The tobacco tax burden in El Salvador is one of the lowest in Latin America and the social costs of tobacco consumption largely exceed the tobacco tax revenues. An increase in tobacco tax could significantly decrease the number of smokers and reduce the burden of tobacco-related diseases and deaths.

The association between flavor capsule cigarette use and sociodemographic variables: Evidence from Chile.

PURPOSE: The objective of this article is to examine the factors associated with smoking of flavor capsule cigarettes in Chile, where the popularity of these products has increased dramatically, a trend increasingly observed across the world. METHODS: A representative poll of 851 smokers in Metropolitan Santiago de Chile, which comprises 40% of the country's total population, was implemented in mid-2017. Smokers were given a questionnaire that collected socio-demographic information and information on smoking patterns. Four discrete-choice models were estimated on the decision to smoke flavor capsule cigarettes to better understand the statistical relationships between traits of smokers and the consumption of flavor capsule cigarettes. RESULTS: The results of these models show that each year less in a smoker's age increases the likelihood of preferring flavor capsule cigarettes by, on average, between 0.8 and 0.9 percentage points. If the smoker is a woman, the likelihood of preferring flavor capsule cigarettes increases between 13.4 and 13.5 percentage points. Results also reveal a positive relationship between the price paid and the consumption of flavor capsule cigarettes, indicating that these cigarettes tend to be more expensive. There is no statistical relationship between participation in the labor market and smoking these products. CONCLUSIONS: Chile has the world's highest prevalence of flavor capsule cigarette smoking, which is concentrated among young people (25 years and younger) and females. No relationship between socioeconomic status and use of these products is found, though there are indications that such relationship may exist, as they were at the time of study 14% more expensive, on average, than conventional non-flavored cigarettes. As in most countries, the tobacco industry appears to be deliberately promoting these products with the goal of halting or slowing the decline in cigarette consumption in Chile. Thus, to reduce cigarette consumption (especially among youth), restricting or forbidding cigarette flavorings of all types, including flavor capsules, would be an effective strategy.

The impact of prices on alcoholic beverage consumption in Chile.

INTRODUCTION AND OBJECTIVE: Chile is among the countries with the highest alcohol consumption per capita in Latin America, but little has been done in the way of public policy and policy research to overcome this problem. The objective of the present study is to estimate demand elasticities (own-price, cross-price, expenditure and quality) for three groups of alcoholic beverages in Chile: spirits, wines, and beers. DATA AND METHODS: The study uses data from the VII Encuesta de Presupuestos Familiares (Family Budget Survey) 2011-2012 conducted by the National Institute of Statistics. Because of problems with the quality of the measurement units, hot-deck imputation method was used with the alcohol purchases that presented problems. To estimate the demand elasticities, the Almost Ideal Demand System (AIDS) method proposed by Deaton was used. Quality decisions were estimated for each beverage separately using an equation proposed by Deaton in the three-step AIDS. RESULTS: The estimated elasticities were more inelastic for spirits (-0.14, P<0.01), followed by wines (-0.77, P<0.01) and beers (-0.93, P<0.01). Spirits reported less sensitivity to changes in the total budget, while wines reported the most sensitivity to changes in the total budget (expenditure elasticity). Wines also reported the most sensitivity related to quality for changes in the total budget (0,20, meaning that a 10% increase in a household's total expenditure increases the "quality" of purchased wines by 2%). CONCLUSIONS: Own-price elasticities reported for spirits, wines and beers are consistently negative, and inelastic, in line with international evidence. Although own-price elasticities for spirits is more inelastic than found in most studies, its quality-elasticity is more positive and greater. This could be explained by the greater price dispersion of spirits, as well as spirits (and wine) being consumed more than beers in Chile. This in turn may be because consumers have the option of switching to cheaper, Chilean-produced spirits such as pisco and wines when prices rise. The existence of these relatively broad quality-elasticities points to the need for a change in the alcohol tax structure from the current ad-valorem tax to a specific tax that could reduce price dispersion and curb total consumption.

Relationship between smoking and health and education spending in Chile.

OBJECTIVE: To estimate the degree to which tobacco consumption is associated with spending on a set of goods and services in Chile, especially health and education, for the total population as well as for specific subgroups. METHODS: A seemingly unrelated regression equation system was used to estimate the statistical relationship between having tobacco expenditures and the budget share allocated to other items for the total population and for specific subgroups in Chile (eg, households within the bottom/top 33% by total expenditures). The use of household-level data allows for the control of a number of sociodemographic characteristics. The nationally representative 2012 Chilean Household Expenditure Survey was used for the analysis. RESULTS: Tobacco consumption is associated with lower budget shares allocated to healthcare, education and housing expenses, especially for poorer households. In the case of health, not consuming tobacco is related to higher health expenditures: up to 32% for the total population. Similarly, in the case of education, not consuming tobacco is statistically related to higher education expenditures: up to 16% for the total population. For all groups, tobacco consumption is also related to a significantly higher budget share allocated to alcoholic beverages. CONCLUSIONS: The strong significant statistical relationship found between tobacco consumption and resources allocated to healthcare and education consumption may be indicative of the existence of a crowding out effect of tobacco. This effect, in turn, may increase the burden that the rest of society must bear for the increased healthcare that they require because of tobacco consumption.