1.  2007 Johns Hopkins Bloomberg School of Public Health Section B A Look Ahead: Summary of Main Findings

2.  2007 Johns Hopkins Bloomberg School of Public Health 2 The Costs of Smoking Presented by Dr. Hana Ross  American Cancer Society  The International Tobacco Evidence Network (ITEN)

3.  2007 Johns Hopkins Bloomberg School of Public Health 3 Perspectives for Costing Society  Most comprehensive perspective Individuals and households Public finances Businesses and employers

4.  2007 Johns Hopkins Bloomberg School of Public Health 4 Classification of Costs Direct costs: reduction in existing resources Indirect or productivity costs: reduction in potential resources due to premature morbidity or mortality  Includes lost wages due to time off from work and lower quality of life (can be internal or external) Internal costs (private): costs borne by the fully informed smoker External costs (externalities): health and productivity losses to community due to secondhand smoke

5.  2007 Johns Hopkins Bloomberg School of Public Health 5 Healthcare Costs Attributable to Smoking Calculate the smoking-attributable fraction of total costs  Eliminate nonsmokers  Eliminate diseases among smokers not caused by smoking  Subtract average health care costs for the population Calculate the population-attributable risk from:  The relative risk that smokers have of getting a specific condition compared to nonsmokers or  The relative risk for those exposed to secondhand smoke (SHS) compared to those not exposed The 2006 U.S. Surgeon General’s Report presents relative risks for exposure to SHS

6.  2007 Johns Hopkins Bloomberg School of Public Health 6 Tobacco Taxation Presented by Frank J. Chaloupka, PhD  University of Illinois at Chicago  The International Tobacco Evidence Network (ITEN)

7.  2007 Johns Hopkins Bloomberg School of Public Health 7 Why Tax Tobacco? To promote public health  To induce current users to try to quit, keep former users from restarting, and prevent potential users from starting  To reduce consumption among those who continue to use To generate revenue To recover the costs of treating smoking-related illnesses and lost productivity

8.  2007 Johns Hopkins Bloomberg School of Public Health 8 Types of Tobacco Taxes Taxes on value of tobacco crop Customs duties on tobacco leaf imports and/or exports Customs duties on tobacco product imports and/or exports Sales taxes

9.  2007 Johns Hopkins Bloomberg School of Public Health 9 Elasticity of Demand Price elasticity of demand  A measure of the responsiveness of the quantity demanded of a good to change in price  Equals the percentage change in quantity demanded divided by the percentage change in price: Example: ΔQ/Q ΔP/P -10/100 0.1/1 -0.1 0.1 equals

10.  2007 Johns Hopkins Bloomberg School of Public Health 10 Elasticity of Demand Crossprice elasticity of demand  Measures the extent that the quantity demanded of one good changes when the price of another good changes Elastic demand  Elasticity less than –1.0  The quantity demanded decreases proportionately more than the price increases Inelastic demand  Elasticity greater than –1.0  The quantity demanded decreases by less than the percentage increase in price  Evidence shows that demand for smoking is inelastic

11.  2007 Johns Hopkins Bloomberg School of Public Health 11 Consumption and Price of Cigarettes: China, 1990–1999 Source: adapted by CTLT from study by Teh-wei Hu and the U.S. Department of Agriculture (2002).

12.  2007 Johns Hopkins Bloomberg School of Public Health 12 Source: adapted by CTLT from Tax Burden on Tobacco, The Campaign for Tobacco Free Kids (2007) and authors’ calculations. Consumption and Price of Cigarettes: U.S., 1970–2006

13.  2007 Johns Hopkins Bloomberg School of Public Health 13 Economic Analysis of the Supply of Tobacco Products Presented by Teh-wei Hu, PhD  University of California, Berkeley

14.  2007 Johns Hopkins Bloomberg School of Public Health 14 Tobacco Supply The tobacco leaf is a very important cash crop in many developing countries  More than 125 countries grow tobacco The global tobacco crop is worth approximately $20 billion in U.S. currency—but less than one percent of the value of the global agricultural sector There are about 20 million tobacco farmers globally Many governments rely on the tobacco leaf as a major source of local tax revenue

15.  2007 Johns Hopkins Bloomberg School of Public Health 15 The Economic Importance of Supply For many countries that produce tobacco leaf and manufacture cigarettes—such as China, India, and Indonesia—tobacco control is more of an economic issue than a public health issue For these countries, although tobacco control can have a negative economic effect in the short run, the benefits of smoking control have a larger positive long-term economic effect

16.  2007 Johns Hopkins Bloomberg School of Public Health 16 Illicit Trade: Economic, Public Health Consequences Presented by Ayda A. Yurekli, PhD  International Development Research Center

17.  2007 Johns Hopkins Bloomberg School of Public Health 17 Economic Impacts of Illicit Trade Lost tax revenues More organized crime Loss of revenue and investment opportunities for legitimate producers Unemployment in legitimate production

18.  2007 Johns Hopkins Bloomberg School of Public Health 18 What Can be Done about Illicit Trade? Have high penalties End duty-free sales Tax stamps License cigarette exporters, manufacturers, and distributors Require a unique identifying code on all packs Make cigarette exporters responsible for final legal destination of cigarettes

19.  2007 Johns Hopkins Bloomberg School of Public Health 19 Conclusion: Economics and Tobacco Control Taxes that increase the price of cigarettes reduce the demand and raise the revenue  The demand for smoking is inelastic with respect to price  Cigarette consumption will decrease—but by proportionately less than the increase in price

20.  2007 Johns Hopkins Bloomberg School of Public Health 20 Conclusion: Economics and Tobacco Control There are strong economic arguments for governments to control both the supply and the consumption of tobacco, including the following:  External health care costs related to smoking and secondhand smoke  Negative health effects and economic losses that accrue not just to the smokers but also to nonsmokers and to society at large (negative externalities)

21.  2007 Johns Hopkins Bloomberg School of Public Health 21 Conclusion: Economics and Tobacco Control Economic arguments for government intervention  The addictive nature of tobacco consumption combined with underage consumption and a lack of full knowledge by consumers  The disproportionate economic impact of smoking on relatively poor countries and poor populations within countries