Cigarette Affordability in Indonesia: Recent Trends and Elasticity

This Report was written by Center for Indonesia’s Strategic Development Initiatives (CISDI) in Indonesia. The report examines cigarette affordability trends between 2010 and 2024 using relative income price (RIP). The researchers find that cigarette affordability only marginally declined in that time period as the RIP remained around 3%. While filtered kreteks and white cigarettes have become less affordable, the affordability of non-filtered kreteks increased, resulting in the overall stagnation. Specifically between 2015 and 2020, affordability declined modestly and national cigarette sales fell from 306 to 276 billion sticks per year, accordingly. A 10% reduction in cigarette affordability would decrease demand by 7.7%. In low-income households, the decrease would be greatest, at 12.1%, compared to middle-income households, where the decline would be 5.9%. The report concludes with recommendations to strengthen tobacco tax policies to reduce affordability and decrease consumption. 

A Policy Brief based on this working paper can be found here.