Time-varying elasticities of demand for cigarettes in Serbia

This study challenges the conventional assumption of constant price elasticity of cigarette demand by demonstrating that taxation and pricing practices can induce structural changes in consumption behaviour. The results reveal that larger, unexpected price increases lead to stronger demand responses, whereas predictable, moderate tax hikes – like those currently applied in Serbia – make demand more inelastic, especially regarding smoking intensity. Consequently, the study concludes that tobacco control policies based on regular, predictable tax adjustments are less effective and instead recommends introducing less predictable, larger tax increases to achieve stronger public health impacts.

Keywords: Time-varying elasticity, tobacco taxation, cigarette prices, household budget survey, Serbia

JEL classification: I18, D12, H21

Countries covered: Serbia