Co-authors: Nigar Nargis, Michal Stoklosa, Jeffrey Drope (American Cancer Society, USA), Geoffrey T Fong, Anne CK Quah, Pete Driezen (University of Waterloo, Canada), Ce Shang, Frank J Chaloupka (University of Illinois at Chicago, USA) The trend in the affordability of tobacco products in Bangladesh: Findings from the ITC Bangladesh Surveys AKM Ghulam Hussain, PhD Associate Professor, Department of Economics University of Dhaka

Background Methodological issues Results Concluding remarks Outline

When we look at the price tag of a product in the store, we do the calculation in the back of our head that how many of this product we can buy with our income. In other words, we count how many of the product we can afford. “Affordability” = price relative to income

50% increase in cigarette excise tax →10.8 m lives saved Increasing cigarette excise taxes can prevent a huge number of smoking-related deaths 0.4 m 1.5 m 0.8 m 2.9 m 2.2 m 3.1 m 50% increase in cigarette excise tax →10.8 m lives saved Rationale of taxation of tobacco Source: Yurekli, Nargis, Goodchild, et al. Economics of Tobacco Control and Health. Vol.2, Health Determinants and Outcomes, in (editor) Scheffler RM, World Scientific Handbook of Global Health Economics and Public Policy. World Scientific, 2016.

WHO FCTC Article 6 Guidelines Taxation and Affordability “When establishing or increasing their national levels of taxation Parties should take into account – among other things – both price elasticity and income elasticity of demand, as well as inflation and changes in household income, to make tobacco products less affordable over time in order to reduce consumption and prevalence. Therefore, Parties should consider having regular adjustment processes or procedures for periodic revaluation of tobacco tax levels.” WHO FCTC Article 6 Guidelines

Tracking affordability of tobacco products Price of 100 cigarette packs Per capita GDP Relative Income Price (RIP) = Affordability: inversely related to RIP

Motivation of the study General Above definition of affordability may be misleading. Overall economic affordable consumption may rise while affordability measured by per capita GDP & a single brand price may fall. Per capita household income and its distribution give further insight into the affordability in reality. Price and / or income change may affect both affordability and brand selection/switching. Simultaneous change in price and income may have mixed effect. Bangladesh experience Affordability in BD increased for all groups and all brands over time. Lower income group experienced higher affordability gain. Motivation of the study

Existing literature has used aggregate level price and income data to measure affordability. Per capita GDP and price of cheapest brand are usually used to estimate relative income price to identify the pattern of changes in affordability and consumption behavior. In this paper we used self reported per capita income and price to estimate Relative Income Price (RIP) to identify the consumption pattern in Bangladesh. We used both descriptive and parametric methods to grasp the pattern of affordability and its changes over time. Data are obtained from nationally representative cohort data on smokers from four waves of International Tobacco Control (ITC) Policy Evaluation Survey in Bangladesh conducted over 2009-2015. This is the first attempt to use individual level self-reported price and income data to measure affordability. Methods

2010-2015 Aggregate measure of Relative Income Price by price categories of cigarettes in Bangladesh Source: Based on price data from National Board of Revenue and per capita GDP from World Development Indicators Database.

Contradiction Relative Income Price by price categories of cigarettes using per capita household income Source: Authors’ calculation using ITC Bangladesh Data.

Income mobility by monthly household income categories in ITC BD Surveys Waves 1-4.

Price movement of cigarette by brand over time Percentage of smokers by cigarette brand Brand switching by wave due to price (and /or income ) change using ITC Data

.2 .4 .6 .8 1 Proportion of affordable consumption of cigarette Proportion of sample population arrange in ascending order of affordability W1(2009) W2(2010) W3(2011-12) W4(2014-15) Equality line Distribution of affordable cigarette consumption by wave and income Inequality of affordable consumption remains more or less unchanged over time when individual level measure is used

Distribution of affordable cigarette consumption using a single brand .2 .4 .6 .8 1 Proportion of affordable consumption by all smokers Cumulative proportion of smokers in ascending order of consumption power 2009 2010 2011-12 2014-15 Equal line Distribution of affordable cigarette consumption using a single brand Inequality of affordable consumption fluctuates over time using a single brand price

Control variables Coef. t P-value Tax 0.0045 15.06 0.000 Age -0.0003 -3.62 Female (Ref=Male) -0.0147 -2.08 0.037 1-8 years education (Ref=0 yrs of education) -0.0063 -2.10 0.035 9 Years or more education (Ref=0 yrs of education) -0.0278 -6.25 Moderate (Socio-economic status: ref=Low) -0.0094 -3.19 0.001 Non-poor /High (Socio-economic status: ref=Low) -0.0315 -10.20 Rural area of residence (Ref=Urban) -0.0116 -0.83 0.407 Medium (Cigarette brands: ref=Low) 0.0383 7.03 High (Cigarette brands: ref=Low) 0.1019 8.43 Premium (Cigarette brands: ref=Low) 0.0637 2.67 0.008 Wave 2 (Ref=Wave 1, low brand) 0.0065 0.81 0.418 Wave 3 (Ref=Wave 1, low brand) -0.0120 -2.55 0.011 Wave 4 (Ref=Wave 1, low brand) -0.0376 -6.31 Model 1: Multivariate analysis of Relative Income Price of Cigarette in BD, 2009-2015 (Cont.)

Control variables Coefficients t P-value Interactions of brands and waves (Ref: W1xlow brand)   Medium brand X Wave 2 -0.0175 -2.01 0.045 Medium brands X Wave 3 -0.0412 -5.65 0.000 Medium brands X Wave 4 -0.0769 -12.23 High brand X Wave 2 -0.0656 -4.98 High brands X Wave 3 -0.1227 -9.88 High brands X Wave 4 -0.2268 -14.68 Premium brand X Wave 2 -0.0436 -1.68 0.094 Premium brands X Wave 3 -0.1827 -6.79 Premium brands X Wave 4 -0.3697 -13.21 Constant 0.1355 7.14 Number of observations 6185 Adjusted R-squared 0.499 Multivariate analysis of Relative Income Price of Cigarette in BD, 2009-2015

Control variables Coef. t Tax 0.00219 8.09 Age -0.0003 -4.32 Female (Ref=Male) -0.0149 -1.9 1-8 years education (Ref=0 yrs of education) -0.0038 -1.18 9 Years or more education (Ref=0 yrs of education) -0.0243 -5.18 Moderate (Socio-economic status: ref=Low) 0.02183 4.34 Non-poor /High (Socio-economic status: ref=Low) 0.07585 6.62 Rural area of residence (Ref=Urban) 0.06546 2.88 Medium (Cigarette brands: ref=Low) -0.0095 -0.59 High (Cigarette brands: ref=Low) -0.0086 -1.4 Premium (Cigarette brands: ref=Low) -0.037 -6.43 Wave 2 (Ref=Wave 1 & Poor) -0.0164 -2.74 Wave 3 (Ref=Wave 1 & Poor) -0.0438 -6.51 Wave 4 (Ref=Wave 1 & Poor) -0.0948 -12.82 Model 2: Multivariate analysis of Relative Income Price of Cigarette in BD, 2009-2015 (Cont.)

Control variables Coef. t Interactions of Socio economic status and waves Moderate X wave 2 (Ref: Poor x W1) -0.0017 -0.21 Moderate X wave 3 -0.0006 -0.08 Moderate X wave 4 -0.001 -0.12 High X Wave 2 0.011 1.42 High X Wave 3 0.00585 0.76 High X Wave 4 0.01097 1.4 Constant 0.19514 9.72 Number of observations 6185   Adjusted R-squared 0.42174 Multivariate analysis of Relative Income Price of Cigarette in BD, 2009-2015

Summary of results of multivariate analysis All cigarette brands in the four tiers became more affordable between 2009 and 2015. The affordability of bidi increased significantly over time. The affordability of smokeless tobacco products remained unchanged. Summary of results of multivariate analysis

Policy implications Simplify the tax system. Change the tax system from tiered ad valorem to uniform specific excise Reduce the price gap between brands. Increase price keeping in pace with inflation and per capita income.

First-Affordability has to be studied from distributional point of view for efficient tax policy. Second-In countries experiencing rapid economic growth, tax and price policies need to be stronger to counteract the effect of income growth on tobacco consumption. Conclusions

Funders’ slide