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Price of cigarrettes and consumption in Chile

August 08, 2019

The paper "Association of Tobacco Control Policies With Youth Smoking Onset in Chile" (Guindon et al, 2019) was recently published, in which the authors intend to examine the relationship between the price of cigarettes, measures aimed at young people not related to prices ( introduced in 2006) and the age of onset of young smokers.

Chile is one of the countries with the highest smoking prevalence rate in the region. By 2014, 35% of Chilean adults were smokers. In 2006 and as a result of its ratification of the Framework Convention for Tobacco Control (FCTC), law 20105 was introduced that brought changes such as: prohibit smoking in closed or public spaces, prohibit sales of cigarettes near schools, increase the age legal to acquire cigarettes from 16 to 18 years old, among others.

But, those decisions have not been similar in the case of the tobacco tax measure. Between 1999 and 2014, taxes did not increase significantly in Chile. In fact, the increases in cigarette prices in Chile have been thanks to the industry itself, which in its case is British American Tobacco (BAT).

To analyze the relationships of the age of onset of smokers with the measures of control of the law 20105 and cigarette prices, the authors used the data of the Survey of School Population of Chile, and as a methodology they used time risk models Full discrete and a log-log specification.

The results of the authors suggest that higher prices and control policies such as those implemented in 2006 are associated with a lower risk of starting smoking. Although the different measures were associated with a decrease in the risks of starting to smoke, the increase in prices caused by BAT was the factor that had a greater association.

BAT's decision to increase prices, according to the authors, is backed by the addictive nature of cigarettes. By having addicted consumers, producers can compensate their profits in the short and long term. BAT, can increase their prices to get higher profits from their current customers (current smokers), even when they are renouncing to hook new customers.

The results of the study are consistent with large evidence in tobacco economics: an increase in cigarette prices is associated with a decrease in consumption. Particularly in the Chilean case, the increase was due to BAT's own decisions and not government initiatives. However, the high prevalence rates of smoking, compared to the region, should be considered a sign for the Chilean Government. Faced with this type of problem, decision makers must ensure that their proposals are supported by evidence and this study is an example of this for the country.