The economic impacts of cigarette tax reductions on youth smoking in Canada
Publication Source

Brock University, Canada

The Americas
Economy status
High-income economies

Cigarettes are the most commonly consumed recreational chemicals used by Canadians. The current smoking rates (using 1999 data) are 33.7 % for young adults (20- 24 years of age) and 28.1 % for youth (aged 15 to 19). These numbers for younger persons are particularly alarming to health officials and policy makers since most
smokers begin smoking in their youth with a “single puff”. As is well documented, cigarette consumption is linked with premature death and supplemental morbidity effects that put increased stresses upon the provision of health care in Canada. Health officials need to know what tools are particularly useful in discouraging youth from taking up smoking in the first place. This paper estimates smoking demand models for Canadian youth and young adults using the National Population Health Data (NPHS) data from over the period of 1994-1998. The data span a five year period starting after the introduction of very large tax cuts to stem a big increase in the smuggling of illegal cigarettes into Canada from the United States. Since the initial tax cuts, taxes have crept up gradually. In spite of these increases real cigarette prices in 1998 were still less than they were in 1994 for more than half of the Canadian population. Using the NPHS data we calculate a participation elasticity of -0.914 for youth aged 14 to 18. This suggests that a 1 % decrease in the price of cigarettes would increase the number of daily smokers in this age group by 0.9 %. Thus, the tax cuts almost certainly led to increases in both the number of daily youth smokers and also to increases in the numbers of young people who begin smoking at earlier ages.