Poster Paper: The Impact of Cigarette Tax Increase on Smoking Behavior by Demographic Groups

Saturday, November 4, 2017
Regency Ballroom (Hyatt Regency Chicago)

*Names in bold indicate Presenter

Haeil Jung and Dahye Kim, Korea University


This study examines the impact of the recent increase in a cigarette tax in South Korea on people’s smoking behavioral changes, especially by different levels of education. On January 1st, 2015, a cigarette tax hike led to an increase in the cigarette price from around 2.5 dollars to 4.5 dollars per pack, jumping almost two-fold. Although Korean government argued that this tax increase would curb the cigarette consumption and improve national health in the long run, the controversy over the effectiveness of the tax increase continues to this day. Some argue that the total amount of cigarette consumption has shrunk markedly after the tax increase while others contend that the tax increase rather impose a heavy burden on lower-income smokers.

Considering these arguments seem to conflict with each other, a more careful study focused on income difference might be required in many aspects. First, our theoretical consideration leads to the hypothesis that workers with lower income and lower levels of education are more likely than others to become smokers and are less likely to quit. So we delve into the impact of the tax increase on individuals by distinguishing different categories of education as a proxy for income levels. Secondly, previous studies focused on cigarette consumption in general. For our perspective, however, threshold from smoking to nonsmoking or vice versa would be more important than mere quantities, due to the difficulty in quitting smoking completely. Finally, tobacco is different from other types of consumer goods because of addiction. Thus, we carried out further studies regarding the average rates of smoking and willingness to quit smoking, in order to investigate the extent of their addiction. This study uses a panel dataset provided by Korea Institute for Health and Social Affairs (KIHASA) for 4 years, including 2015 when the cigarette price went up.

Our preliminary analysis finds that regardless of education levels, there was significant smoking behavioral change after the steep tax increase. The number of people who suddenly quit smoking after the tax increase grew in 2015 compared to the patterns in the previous 2 years. Furthermore, the number of people who start to smoke also declined. However, no significant change in the number of people who started to smoke was detected among people with a high-school diploma. Contrary to our assumption, behavioral changes of quitting smoking were significant for all education levels. On the other hand, in the analysis regarding the average amounts of cigarettes smoked per day, smokers with lower education levels tend to reduce the number of cigarettes more than those with higher levels of education. However, their average rates of smoking originally appeared almost as twice as those with higher education levels, indicating they still rely on smoking even after the tax increase. Nonetheless, reduction in smoking was salient in general. In the case of people’s willingness to quit smoking, our analysis finds that people with lower education were more eager to quit smoking than those with higher degrees after the tax increase.