Price elasticity and other forces shaping cigarette demand in South Africa over 1996-2006
Stellenbosch Working Paper Series No. WP14/2007Publication date: 2007
Author(s):
The study seeks to re-investigate the price elasticity of South African cigarette demand over the period 1996 to 2006. At first glance, rising cigarette prices seem to have played an important role in reducing cigarette consumption over the sample period, especially during the late nineties. But how dependent is the impact of price increases on general economic conditions and overall health awareness among smokers? Health awareness, in particular, has not received sufficient attention in the South African context, due to a lack of data. Furthermore, previous estimates of price and income elasticity of cigarette demand are based on long annual time series data, which do not allow for changes in underlying tastes and preferences. The paper attempts to disentangle the forces of price, income, health awareness and policy intervention using a quarterly dataset. However, the study also cautions against the upward bias in estimates derived from formal cigarette sales data – in the light of increasing illicit cigarette volumes in South Africa.
JEL Classification:D12, H21, I18, C40
Keywords:Price elasticity, Tobacco control, Cigarettes, Illicit cigarettes, Excise duties, Health awareness
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Upcoming Seminars
Monday 21 July 202512:00-13:00
Izak Odendaal: Old Mutual Wealth Chief Investment Strategist
Topic: "Diverging fiscal policies and what it means for markets"
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Prof Willem Boshoff: Stellenbosch University
Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
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27 Jun 2025 Another setback for the GNU, but oil markets breathe a little easierThis week was marked by heightened tensions both domestically and internationally. At home, friction intensified between the two largest parties in the Government of National Unity (GNU), the ANC and the DA, following the firing of one of the DA's deputy ministers. Internationally, the US conducted airstrikes on three Iranian nuclear facilities using...
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