The Effect of Price (Tax) Policies on Smoking Consumption

Tobacco use imposes health and economic costs both on individuals and society, so it is essential to anticipate plans to control its consumption, by using price policies through tax tools. But in the case of tobacco addiction, there are doubts about the impact of these policies. Therefore, it is necessary to examine the effects of pricing and tax policies by estimating the demand function of smoking and its elasticity. The almost ideal demand system (AIDS) model which is the most effective models is used in this article. The required data were also extracted from cost and income data of the Iranian urban households during the years 2001-2014. Based on the results of estimates, tobacco is a low elasticity good and therefore using taxes doesn’t have much effect on smoking.