Effects of the illicit market on the price elasticity of cigarette consumption in Brazil.

BACKGROUND: An important element to consider in tobacco tax policy is the illicit market of cigarette sales. The objective of this paper is to provide estimates of both conditional and unconditional price elasticities of cigarette consumption in the licit and illicit markets in Brazil. METHODOLOGY: Microdata from the National Health Survey in 2013 and 2019 are used to estimate conditional and unconditional price elasticities of cigarette consumption in the licit and illicit cigarette markets by income quartiles and age cohorts. The identification is based on brand information and the official minimum cigarette price defined by the government, as sales below this price are prohibited and illegal. FINDINGS: The results, robust to potential endogeneity, indicate that there is joint statistical difference in price elasticities across age cohorts and income groups by market type. However, individuals smoking illicit cigarettes, regardless of age cohort and income quartiles, are less sensitive to price changes than those consuming licit brands. CONCLUSIONS: The illicit cigarette market prevents the government from collecting tobacco tax revenues and weakens the social reach of price-oriented antismoking public policies. Fighting the illicit trade should be a major concern of public policies aiming at reducing cigarette consumption.

Observed and expected interest rate pass-through under remarkably high market rates.

This paper investigates the pass-through from observed and expected policy interest rates to the remarkably high lending rates in the Brazilian economy, accounting for financial-institution specific characteristics, borrower types, asymmetric adjustment and persistence in loan rates. We use a unique and non-public dataset with expected variables identified by professional forecasters and apply a fixed-effects approach to alternative specifications as robustness checks. Financial institutions correctly forecast the next target level of the policy rate and anticipate adjustments in their loan rates. There is evidence of over-proportional and positively asymmetric pass-through to loans with higher interest rate margins, implying a positive correlation between degrees of pass-through and spreads across persistent lending rates. These findings contribute to explain why loan interest rates are so high in the Brazilian economy.

On a log-symmetric quantile tobit model applied to female labor supply data.

The study of female labor supply has been a topic of relevance in the economic literature. Generally, the data are left-censored and the classic tobit model has been extensively used in the modeling strategy. This model, however, assumes normality for the error distribution and is not recommended for data with positive skewness, heavy-tails and heteroscedasticity, as is the case of female labor supply data. Moreover, it is well-known that the quantile regression approach accounts for the influences of different quantiles in the estimated coefficients. We take all these features into account and propose a parametric quantile tobit regression model based on quantile log-symmetric distributions. The proposed method allows one to model data with positive skewness (which is not suitable for the classic tobit model), to study the influence of the quantiles of interest, and to account for heteroscedasticity. The model parameters are estimated by maximum likelihood and a Monte Carlo experiment is performed to evaluate alternative estimators. The new method is applied to two distinct female labor supply data sets. The results indicate that the log-symmetric quantile tobit model fits better the data than the classic tobit model.

Extended cost-benefit analysis of tobacco taxation in Brazil.

BACKGROUND: Brazil has experienced a persistent and substantial reduction in the prevalence of smoking in the population since 2006 due to increased taxes on tobacco and other tobacco control policies. Despite the effectiveness of these measures, however, the socioeconomic costs of smoking are still very high. Tobacco taxation in Brazil plays an important role among the measures adopted to curb tobacco use. METHODS: The study combines data from the National Household Sample Survey of 2008 and the National Health Survey of 2013 and applies cross-section, pooled, and probit estimations, to estimate price elasticities of tobacco consumption by distinct population cohorts. The paper presents a comprehensive cost-benefit analysis resulting from a one-time tax increase on manufactured cigarettes using estimated conditional price elasticity of cigarette consumption and probability of smoking by income and age quartiles. FINDINGS: Each 10% price increase (BRL 0.54), due to higher tobacco taxes, reduces cigarette consumption by about 5%, and for poor smokers, it would lead to net income gains by about BRL 39.00 per month (in 2019 values). The highest net income effects were observed for the younger, aged between 15 and 29 years, and for middle-aged individuals, between 40 and 59 years old. Higher tobacco taxes lead to lower medical expenses on tobacco-related diseases and a longer, healthier and more productive life. Most importantly, this policy is progressive, as its economic effects are stronger for the poorer than for the richer according to the income quartiles. CONCLUSIONS: A tax increase that rises cigarette prices generates significant social benefits by reducing tobacco spending and medical expenses on tobacco-related diseases and raising future years of life and net income. The total benefits for the individual and the society go way beyond the public finance improvement.

Effects of the Brazilian tax reform plans on the tobacco market.

BACKGROUND: There has been an intense debate in the Brazilian National Congress on how to reform the country's tax system on consumption. This paper investigates the effects of the tax reform under the Constitutional Amendment Bill 45/2019 on cigarette prices, consumption and tax collection. The reform will introduce a new goods and services tax (GST) and tobacco excise tax (TET). METHODS: The micro data from the National Household Sample Survey (PNAD) of 2008 and the National Health Survey (PNS) of 2013 are inputs in the simulation in order to determine the smoking behaviour and consumer responses to price changes as accurately as possible across the different Brazilian states. We developed three scenarios for the tobacco tax reform and their effects on cigarette prices, smoking behaviour and tax collection. We also estimate the size of the illicit cigarette market by Brazilian state and simulate the impacts of a 10% reduction in its market share. FINDINGS: Overall, we found that a GST of 27% and a TET of either 51%, 56% or specific 3.89 BRL per pack would lead to considerably higher cigarette prices, lower cigarette consumption and, above all, an increase of cigarette tax collection between 8% and 27% depending on the state. A discretionary 10% reduction in the illicit market would add about 8.5% of extra tax collection per year to the country. CONCLUSIONS: The simulated scenarios demonstrated that, to keep the cigarette prices at least at the same level as those in the current tax scheme, TET should be no less than 77.85% of the retail price. This means that any politically feasible tax reform should result in higher cigarette prices and a reduction in cigarette consumption. Considering the nationwide effect, in all scenarios, the total increase in tobacco tax revenue is around 8.5% or 1.5 billion BRL per year. This extra revenue is highly desirable in an environment of chronic fiscal imbalance and the COVID-19 pandemic crisis.

Assessing the Effects of a Tobacco Tax Reform on the Industry Price-Setting Strategy.

In July 2020, the Executive Power submitted Bill no. 3887-2020 as the first step towards a wide reform of the Brazilian tax system. It will replace the current PIS/COFINS (charged on turnover of companies) by the CBS (a tax on goods and services), which includes a special regime for cigarettes. The novelty is that the specific cigarette tax will be charged on the highest retail price per cigarette brand across the country. This research simulates three scenarios that differ according to the price-setting strategy of the tobacco industry in reaction to the proposed tax reform. In all simulations, the tax reform would result in considerably higher cigarette prices, lower cigarette consumption, higher tax collection, and an implicit minimum price that is far above the current official price floor. Furthermore, the price dispersion and cross-border shopping across states would be reduced because prices and tax burden per brand would tend to be the same across the country due to the dominant price-setting strategy in the cigarette industry.

[Are there irrationalities in the consumption of anti-obesity drugs in Brazil? A pharmaco-econometric analysis of panel datasets]. / Há irracionalidades no consumo de inibidores de apetite no Brasil? Uma análise farmacoeconométrica de dados em painel.

The scope of this study is to analyze the determinants of the use of appetite suppressants (amfepramone, femproporex, mazindol and sibutramine) through the estimation of a dynamic panel dataset model for the Brazilian state capitals and the Federal District (DF) in the period from 2009 to 2011. The results show that consumption of appetite suppressants did not follow the geographic distribution of overweight and obese individuals across the capitals and DF. There is a recurrent consumption of appetite inhibitors, in which 79% of the current consumption of these drugs is explained by past consumption. Among the variables that explain the use of inhibitors, the percentage of obese adults, the percentage of adults who habitually consume fruit and vegetables, and the coverage rate of health plans stand out. The pharmaco-econometric analysis suggests that there are problems in the rational use of appetite suppressants in the Brazilian state capitals and the Federal District with respect to both the combined consumption of these drugs with other medicines - deemed illegal by the Federal Council of Medicine and ANVISA - and in the therapeutic prescription of these products.

Há irracionalidades no consumo de inibidores de apetite no Brasil? Uma análise farmacoeconométrica de dados em painel / Are there irrationalities in the consumption of anti-obesity drugsin Brazil? A pharmaco-econometric analysis of panel datasets

Este estudo busca analisar os determinantes do consumo de inibidores de apetite (anfepramona, femproporex, mazindol e sibutramina) por meio da estimação de um modelo dinâmico de dados em painel para as capitais brasileiras e do Distrito Federal (DF) no período de 2009 a 2011. Os resultados revelam que o consumo de inibidores de apetite não acompanhou a distribuição geográfica dos indivíduos com excesso de peso e com obesidade nas unidades estudadas. Do consumo recorrente de inibidores, 79% são explicados pelo ocorrido no passado. Dentre as variáveis que explicam o consumo de inibidores, destacam-se os percentuais de adultos com obesidade e que dos que consomem frutas e hortaliças e a taxa de cobertura de planos de saúde. A análise farmacoeconométrica sugere que há problemas no uso racional dos inibidores de apetite nas capitais brasileiras e no DF, seja no que tange ao consumo desses medicamentos com outros fármacos - considerados ilegais pelo Conselho Federal de Medicina e pela Anvisa - e, também, na indicação terapêutica de uso desses produtos.

The scope of this study is to analyze the determinants of the use of appetite suppressants (amfepramone, femproporex, mazindol and sibutramine) through the estimation of a dynamic panel dataset model for the Brazilian state capitals and the Federal District (DF) in the period from 2009 to 2011. The results show that consumption of appetite suppressants did not follow the geographic distribution of overweight and obese individuals across the capitals and DF. There is a recurrent consumption of appetite inhibitors, in which 79% of the current consumption of these drugs is explained by past consumption. Among the variables that explain the use of inhibitors, the percentage of obese adults, the percentage of adults who habitually consume fruit and vegetables, and the coverage rate of health plans stand out. The pharmaco-econometric analysis suggests that there are problems in the rational use of appetite suppressants in the Brazilian state capitals and the Federal District with respect to both the combined consumption of these drugs with other medicines - deemed illegal by the Federal Council of Medicine and ANVISA - and in the therapeutic prescription of these products.