THE DEMAND FOR TOBACCO PRODUCTS AT HOUSEHOLD LEVEL IN PAKISTAN

Submitted by: Hira Qasim

Supervisor: Dr .Mehmmood Khalid Co-Supervisor: Mr. Ajmal Jahangeer

Department of Health Economics

20th Nov 2015

o The tobacco consumption is possible by two ways, smoking and chewing.

o Globally the use of tobacco especially the cigarette consumption has been increasing

rapidly since the cigarettes were manufactured at the beginning of 20th century.

o Tobacco use in Pakistan is common and one of the highest in South East Asian

region (WHO report , 2013).

o Among few countries of the world, Pakistan is one where smokeless tobacco (chew

and raw tobacco) is widely consumed ( 2014 Global Report).

o 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).

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).

Source: Sreeramareddy et al, (2014)

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.

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.

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.

.

• 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 (1988-1997).

• 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 -0.63 (kostova et al. 2012).

• 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).

Data

• Pakistan Social Living Standards Measurements (PSLM) survey (2010-

2011)

•

• The survey is conducted by Federal Bureau of Statistics and provides

information on 16341 households located across Pakistan. .

• The data provides information on household characteristics and

consumption of various food and non-food items including tobacco

products.

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 Products

• Cigarettes and Bidi,

• Chew and raw tobacco

• Pan prepared

• Choona khatta and supari etc.

Total /Average Tobacco Expenditures along with socio-economic

determinants

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.

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

• 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 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

Data Findings

Tobacco

Users

households,

7422 (45.4%)

Non-Tobacco

Users

households,

8919

(54.6%)

Total

Households,

16341

(100.0%)

Demographic and Socio- Economic Profiles of Tobacco

Consumers

97.3%

2.7%

Percentage Distribution of Tobacco

Consumers by Gender

Male

Females

7.2

35.1

37.5

20.1

0

5

10

15

20

25

30

35

40

15-29 30-44 45-59 60 +

Percentage Distribution of Tobacco users by Age Groups

50.4

15.8

23.1

4.5 3.9 1.8

0.4

0

10

20

30

40

50

60

No Education Primary Middle Secondary Intermediate Higher education Others

Percentage Distribution of Tobacco users by Educational

Status

18.4

20.8

22.1

19.9

18.8

Poorest Poorer Middle Richer Richest

Percentage Distribution of Tobacco users by Income

Groups

Non-Working

15%

Working

85%

Percentage Distribution of Tobacco users by working and

non working status

Household's characteristics

Expenditures on cigarettes ,Bidi

and lighters

Expenditures on chew

tobacco and tobacco raw

Expenditures on

pan prepared

Expenditures on choona

,khaata and supari etc

Average Tobacco

Expenditures

Gender of the head

Males 343 56 14 26 439

Females 209 74 9 24 316

Age of the Head

15-29 294 43 17 28 382

30-44 334 44 11 25 414

45-59 358 57 15 28 458

60 and more 332 83 15 24 453

Chi- Square of Gender = 1.0, Chi- Square of Age = 0.04

Average Tobacco Consumption Expenditures per annum (in Rupees) by

Age and Gender

Household's characteristics

Expenditures on cigarettes and

lighters

Expenditures on chew tobacco and

tobacco raw Expenditures on

pan prepared

Expenditures on choona ,khaata

etc Average Tobacco

Expenditures

0 90 91 0 0 181

1-2 277 46 15 29 367

3-4 350 53 12 25 440

5 and more 393 75 14 25 507

Average Tobacco Expenditures by Numbers of Adult

Household's characteristics

Expenditures on cigarettes and

lighters

Expenditures on chew tobacco and

tobacco raw Expenditures on

pan prepared

Expenditures on choona ,khaata

etc Average Tobacco

Expenditures

1-2 292 40 12 23 366

3-4 310 53 14 27 404

5 and more 399 71 14 27 511

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

0 319 48 11 25 403

1-2 323 56 15 27 420

3-4 395 70 13 25 503

5 and more 414 70 21 40 544

Household's

characteristics

Expenditures

on cigarettes,

lighters and

Bidi

Expenditures

on chew

tobacco and

tobacco raw

Expenditures

on pan

prepared

Expenditures

on choona

,khaata and

Supari etc

Average

Tobacco

Expenditures

Punjab 365 61 8 3 437

Sindh 407 11 31 75 524

Khyber

Pakhtunkhwa

85 145 0 1 231

Baluchistan 455 29 7 13 504

Household's

characteristics

Expenditures

on cigarettes,

lighters and

Bidi

Expenditures

on chew

tobacco and

tobacco raw

Expenditures

on pan

prepared

Expenditures

on choona

,khaata and

Supari etc

Average

Tobacco

Expenditures

Rural 335 70 6 18 428

Urban 348 33 27 41 450

Household's

characteristic

s

Expenditures

on cigarettes,

lighters and

Bidi

Expenditures

on chew

tobacco and

tobacco raw

Expenditures

on pan

prepared

Expenditures

on choona

,khaata and

Supri etc

Average

Tobacco

Expenditures

No education 305 68 10 21 403

Primary 371 49 12 28 460

Secondary 345 51 18 26 439

Middle 404 31 21 49 506

Intermediate 457 28 26 52 564

Higher

education

464 20 36 55 575

Others 781 32 1 0 815

Household's

characteristic

s

Expenditures

on cigarettes

and Bidi

lighters

Expenditures

on chew

tobacco and

tobacco raw

Expenditures

on pan

prepared

Expenditures

on choona

,khaata and

Supari etc

Average

Tobacco

Expenditures

Poorest 221 61 6 15 303

Poor 290 52 8 23 373

Middle 329 54 12 30 425

Rich 378 57 20 28 482

Richest 483 60 22 35 600

Average Unit values/Prices of Tobacco Products by Income

Quintiles

Regression Results

Ordinary Least Square Regression of the Determinants

of Total Tobacco Expenditures

Own Price and Income Elasticities of Cigarettes and Bidi

Explanatory Variables Beta Coefficients T values Significant values

Male Head 1 -0.21 -0.81 0.42

Age (in complete years) 0.00 0.25 0.81

Square of head age -1.69 -0.10 0.92

Number of Adults in the

household 0.09 2.38 0.02**

Number of Adult Males in

the household -0.01 -0.40 0.69

Number of youth in the

household -0.05 -1.22 0.22

Primary 2 0.09 0.88 0.38

Middle2 -0.03 -0.35 0.73

Secondary2 -0.20 -1.73 0.09***

Intermediate2 -0.06 -0.42 0.68

Higher Education2 -0.35 -1.84 0.07***

Others2 -1.01 -1.44 0.15

worked status 3 0.07 0.59 0.56

illness in household 4 -0.13 -2.01 0.05**

Log of the unit price of

cigarettes and Bidi -0.29 -3.14 0.00*

Log of the Income Level 0.06 0.79 0.43

Urban 5 -0.13 -1.54 0.13

Sindh 6 0.05 0.47 0.64

Khyberpakhton 0.34 0.47 0.64

Baluchistan -0.416 -3.07 0.002**

Constant 3.06 3.51 0.0*

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.

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,

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.

Selvaraj.S , Karan.A , Srivastava.S, 2009-2010. Price Elasticity of Tobacco Products among Quintile Groups in India, 2009-10

Ali Khan Khawaja and Muhammad Masood Kadir, 2004. Smoking among adult males in urban community of Karachi, Pakistan. The Aga Khan University Karachi.vol 35(4).

Burki et.al, 2013. The Economies of Tobacco and Tobacco Taxation in Pakistan. Coalition for Tobacco Control Pak, http://ctcpak.org/ . 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), 431-5.

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, 1997. Assessment of Economic Costs of Smoking. World Health Organization (2011).

Economics of Tobacco Toolkit. WHO/ World Health Statistics, (2013).

THANKS