January 31, 2019

New Collection of Papers Explores the Economics of NCDs

A new special collection of PLOS ONE, “Economic Cases for NCD Prevention and Control: A Global Perspective,” edited by Rachel Nugent (RTI International), Muhammad Jami Hussein (U.S. Centers for Disease Control and Prevention) and Tobacconomics Director, Frank Chaloupka, was launched at the annual Prince Mahidol Award Conference in Bangkok this week.

Noncommunicable diseases (NCDs) cause high productivity losses and healthcare costs, which can strain economies with limited healthcare systems, undermine social and economic development, and dramatically affect a country’s health security and stability. However, investments in effective NCD prevention and control strategies can result in millions of premature deaths averted and billions gained in economic output.

Aiming to expand the evidence base on the economic burden of NCDs and the impact of NCD prevention and control programs globally, the International NCD Economics Research Network has published the special collection. The collection currently features nine articles on economic evaluations and investment cases of NCD interventions, evaluation of NCD risk reduction policies, and the economic impacts of NCDs on households, health systems, and nations. More papers will be added in the coming months.

The collection is especially notable to us, because it includes four papers by Tobacconomics researchers covering tobacco, alcohol and sugar-sweetened beverage taxation!

Yanyun He, Ce Shang and Frank Chaloupka consider “The association between cigarette affordability and consumption: An update”. Rapid economic growth in low- and middle-income countries (LMICs) means that even if real cigarettes prices are rising, they may still become more affordable over time. This study calculates cigarette affordability trends for 78 countries worldwide from 2001 to 2014. It takes previous research a step further by examining the association between cigarette affordability and consumption, and calculating an affordability elasticity of demand.

He, Shang and Chaloupka show that cigarettes became more affordable in low- and lower middle-income countries from 2001 to 2014. The affordability elasticity of demand differed significantly between high-income countries (HICs) and LMICs, but the aggregate results show that a 10% decline in affordability of cigarettes led to a 2% decrease in per capita consumption, which has remained unchanged over time. They concluded with the recommendation of further price increases on cigarettes to control the smoking epidemic in low- and lower middle-income countries. In particular, the rate of price increase should exceed the rate of economic growth and outpace the inflation rate to make cigarettes less affordable and thereby reducing tobacco use.

Moving to alcohol, Ce Shang, Xuening Wang and Frank Chaloupka consider “The association between excise tax structures and the price variability of alcoholic beverages in the United States”. Recent tobacco taxation research suggests that excise tax structure plays an important role in the effectiveness of increasing taxes in reducing consumption. However, evidence on excise tax structures of alcoholic beverages is scarce. Shang and colleagues linked price variability measures for beer, wine, and liquor in the U.S. with state-level excise tax structures from 2003 to 2016. Results suggest that, compared with a specific excise tax structure based on volume, a mixed structure with both specific and ad valorem components is associated with 38% greater beer price variability. In addition, a mixed excise tax structure for liquor was associated with 60–77% greater liquor price variability. However, these associations do not imply a causal link between tax structures and price variability, and future research is needed to identify the causal impact of tax structures on price variability.

In another paper that considers alcohol, Evan Blecher, Alex Liber, Corné Van Walkbeek and Laura Rossouw examine the trends in beer affordability in their paper, “An international analysis of the price and affordability of beer”. The aim was to apply existing methods for measuring the affordability to beer in a large cross-section of countries, and to investigate trends in affordability over time in 92 countries from 1990 to 2016. While beer is, on average, similarly priced in HICs and LMICs, it is significantly more affordable in HICs. There is significant variation in both price and affordability in HICs and in LMICs. Beer has become cheaper in real terms in 49% of HICs and 43% of LMICs. Beer became more affordable in 81% of HICs and 95% of LMICs. The increased affordability over time of beer in most countries raises concerns about public health. As a result, the authors recommend tax increases on beer so that it becomes less affordable over time.

Finally, in a paper that considers the implications for sugar-sweetened beverage (SSB) taxation, Violeta Chacon, Guillermo Paraje, Joaquin Barnoya and Frank Chaloupka investigate the “Own-price, cross-price, and expenditure elasticities on sugar-sweetened beverages in Guatemala”. The obesity epidemic is spreading rapidly in Guatemala, a country still struggling with undernutrition. SSB consumption is strongly associated with being overweight or obese, and developing NCDs. In Guatemala, SSBs are readily available and consumption is high, particularly among adolescents. SSB taxes have been proposed as a cost-effective way to reduce consumption and generate revenues for public health, as has been demonstrated in several countries around the world.

Chacon and colleagues conducted a secondary analysis to estimate price elasticities using the 2014 Guatemala Living Conditions National Survey, which includes national representative household expenditure data. Own price, expenditure, quality, and cross-price elasticities of milk, soft drinks, packaged juices, and bottled water were estimated using Deaton’s Almost Ideal Demand System. Own-price elasticity of soft drinks is -1.39, meaning that with a 10% increase in price would result in a 13.9 decline in consumption. Expenditure elasticity for soft drinks is , meaning that a 10% increase in household expenditure would result in a 9.9% increase in demand. Expenditure elasticity for milk is 0.07 and soft drinks 0.07, which implies that as household total expenditure increases, the quality of these beverages measured by their unit values also increases.

Overall, soft drink demand is highly sensitive to changes in prices, suggesting that SSB taxes could significantly reduce consumption, which, in turn, could contribute to curbing the overweight/obesity epidemic.

These four papers expand the evidence-base for taxation as an effective strategy for curbing the global spread NCDs. Kudos to the authors and editors on the launch of this special collection!