The impact of taxation on tobacco consumption in Mexico

BACKGROUND

The price of cigarettes to consumers in Mexico, and Latin America in general, remains low in comparison with other regions of the world. In Mexico, taxes represented 59% of the total price of cigarettes in 2006, compared to 75% or more in many high-income countries. The feasibility of raising taxes on cigarettes in Mexico--to both discourage consumption and increase revenues--is an important policy question.

METHODS

Using household survey data, we undertake a pooled cross-sectional analysis of the demand for cigarettes in Mexico. We use a two-part model to estimate the price elasticity of cigarettes. This model controls for the selection effect that arises from the fact that the impact of price on the decision to smoke or not is estimated using all households in the dataset.

RESULTS

The results indicate that price is a significant factor in household decisions concerning smoking and the number of cigarettes smoked. Holding other factors constant, our simulations show that a 10% increase in the cigarette tax in Mexico--calculated as a percentage of the price--yields a 12.4% increase in the price to the consumer, a 6.4% decrease in consumption of cigarettes and a 15.7% increase in the revenue yielded by the tax.

CONCLUSION

In Mexico, there are strong arguments for increasing cigarette taxes. Revenue raised could be used to further prevent tobacco consumption and to finance current funding shortages for the treatment of diseases related to smoking.

Economic evaluation of Mectizan distribution

The distribution of ivermectin has dramatically altered the nature of onchocerciasis control. Existing economic analyses of ivermectin distribution programmes show that these programmes have a highly beneficial impact. Most analyses have estimated the economic benefits in terms of increased labour productivity as a result of reductions in blindness, and in terms of additional land-availability because of a reduced transmission of the parasite. Economic evaluations of the Onchocerciasis Control Program (OPC) in West Africa have calculated a net present value - equivalent discounted benefits minus discounted costs - of $485 million for the programme over a 39-year period, using a conservative 10% rate to discount future health and productivity gains. The net present value for the African Program for Onchocerciasis Control (APOC) is calculated at 88 million US dollars over a 21-year time period, also using a 10% discount rate. Cost-effectiveness analyses of ivermectin distribution have found a cost of 14-30 US dollars per disability-adjusted life-year prevented - estimates comparable with other priority disease control programmes. However, the economic success of ivermectin distribution is sensitive to the fact that the drug itself has been donated free of charge. The market value of Merck's donations to the APOC for just 1 year considerably outweighs the benefits calculated for both the OPC and the APOC over the life of these projects. Pending the development of an effective macrofilaricide, the distribution of ivermectin will remain a public health priority into the foreseeable future.

Measuring equity in access to health care

This article develops and uses methodologies to: (1) measure equity in the distribution of access to health services; and (2) measure the impact of health insurance programs on equity. The article proposes two egalitarian-based indicators for measuring equity in terms of access to health care--a concentration coefficient derived from the Gini coefficient, and the Atkinson distributional measure and also employs a weighted Utilitarian social welfare function to measure overall levels of access. The article defines access as the use of health care by individuals with a need for care; need is measured as self-reported morbidity. The setting for the empirical application is the country of Ecuador. The Ecuador Social Security Institute runs a General Health Insurance (GHI) program, whose affiliates are primarily workers in the formal sector of the economy. The principal data source is the 1995 Ecuador Living Standards Measurement Survey. The study uses a microeconomic health care demand model and bivariate probit estimation techniques to measure the impact of insurance on health service use for each quintile of adjusted per-capita household expenditure. The study also predicts health care use and program impact for each quintile under a series of simulation scenarios corresponding to proposed expansion of eligibility for the GHI program. The GHI program increases overall access to health care, but has a negative impact on equity in the distribution of health services. The benefits of the program, calculated as its marginal impact on the probability of using of health care, have a strongly regressive distribution. Expanding eligibility to the self-employed makes the benefit more equitably distributed (but still inequitable), and increases overall social welfare considerably. Expanding eligibility to the dependents of the insured person has similar effects, although less important in magnitude.

Measuring the impact of health insurance with a correction for selection bias--a case study of Ecuador

This article develops and uses methodologies to evaluate the impact of publicly-financed health insurance programmes on the use of health care. Using univariate and bivariate probit estimation techniques, the study tests and corrects for endogeneity resulting from selection bias. Potential endogeneity arises from the choice to be insured, eligibility for insurance, and differences in individuals' health status. The setting for the study is the country of Ecuador. The General Health Insurance (GHI) programme, which primarily covers workers in the formal sector of the economy, is found to have a strong positive association with the use of curative health care after correcting for selection bias, but no significant effect on the use of preventive care. Individuals with severe illnesses who are eligible for GHI have a preference for private health care, and self-select out of the GHI programme. The Seguro Campesino Social (SSC) programme, directed at farming populations, has positive but insignificant associations with both curative and preventive care.