Elasticity Estimates for Cigarettes in Sri Lanka

Series: Human Resource Development

Although cigarette prices in Sri Lanka have increased over time, cigarettes are still affordable for smokers as tax increases have not kept up with inflation and income increases. Further, the tax structure is not streamlined, and tax policy changes have been implemented in an ad-hoc manner. This study estimates tax and price elasticities of cigarettes, and uses these to assess the effectiveness of tax increases on reducing smoking prevalence in the country, by conducting a simulation analysis.