07 juillet 2009
Income tobacco effect
Findings on how demand for cigarettes changes as consumers’ income increases are inconsistent. The
estimated coefficient of the income variable in most studies of demand for cigarettes is significant and
positive, implying that cigarettes are “normal” goods and that increasing income would have a positive
effect on demand for cigarettes.
However, a number of studies (e.g., Wasserman et al., 1991, Keeler et
al., 1993, Yurekli and Zhang, 2000), particularly those using cross-sectional survey data also found
that income has either an insignificant effect or negative effect on demand for cigarettes. A metaanalysis
by Andrews and Franke (1991) who used results from 48 studies found that the weighted
mean income elasticity is 0.36, which is significantly greater than zero. They also found that the
income elasticity for cigarettes fell over time.
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