"Tobacco Prices Should Increase Annually"... Effectiveness Drops After Four Months

Consumption does not decrease significantly even with price hikes
Warning images on packaging also have little effect

An analysis has found that the effect of raising tobacco taxes as a policy to encourage smoking cessation lasts only about four months. The use of graphic warning images on cigarette packs has also been shown to have little impact. Experts point out the need for a fundamental policy shift, such as linking tobacco prices to inflation for continuous adjustments, rather than relying on one-time price hikes.

A study has found that even if tobacco taxes are increased, the effect disappears after about four months, and sales volumes return to their previous trend.

According to the report "The Effects and Implications of Cash Incentive Policies for Inducing Individual Behavioral Change" published by the Korea Institute for Health and Social Affairs on August 18, the effect of tobacco price increases on reducing cigarette sales lasts for only about four months.

The research team conducted a time-series analysis of changes in cigarette sales before and after tobacco tax hikes. The results showed that cigarette sales temporarily decline immediately after a price increase, but after about four months, sales return to their previous trend. This statistically demonstrates a pattern in which, when a tobacco price hike is announced, people stockpile cigarettes, and once their stock runs out, consumption normalizes again.

Even with price hikes, consumption barely decreases... Warning images also ineffective

The report also presented figures showing how sensitive smokers are to changes in cigarette prices. The price elasticity of demand for cigarettes was estimated to be between -0.42 and -0.44, meaning that even if cigarette prices rise by 10%, actual sales decrease by only about 4.2% to 4.4%. In other words, cigarette consumption does not significantly decrease even when prices go up.

Statistical analysis also found that irreversible factors, such as graphic warning images on cigarette packs and the emergence of heat-not-burn e-cigarettes, did not have a statistically significant impact on overall cigarette sales. This is attributed to smokers having become desensitized to warning images, and regarding e-cigarettes as substitutes for traditional cigarettes. As a result, shock-based policies to encourage smoking cessation have shown only temporary or negligible effects, revealing their limitations.

"Gradual annual increases" Proposal for inflation-indexed pricing

The research team proposed the introduction of an "inflation-indexed" tobacco tax as a more fundamental alternative. This approach would automatically raise tobacco taxes each year in line with consumer price inflation, aiming to prevent smokers from becoming insensitive to price changes by implementing small, steady increases annually instead of large, one-time hikes.

The team explained that this measure would prevent the real price of tobacco from falling due to inflation, thereby providing ongoing motivation to quit smoking and, from a long-term perspective, reducing smoking rates. At the same time, it would reduce both the market shock and the inflationary burden caused by sudden price hikes.

However, the research team pointed out that price policies alone have limitations in encouraging smoking cessation. They stressed the need for a long-term approach that utilizes a variety of policies, such as reducing intrinsic motivation to smoke through social norms campaigns like the "No-Dam (No Tobacco) Campaign," or gradually lowering the nicotine content in cigarettes to reduce their addictiveness.