Cigarette Affordability in Montenegro (Policy Brief)

This Policy Brief was written by the Institute for Socio-Economic Analysis in Montenegro. The policy brief assesses trends in the affordability of cigarettes between 2010 and 2023 and estimates the affordability elasticity for cigarettes. The researchers find periods of increasing and decreasing affordability in that time frame, although cigarettes have become nearly 10% less affordable in 2023 compared to 2010, overall. The recent period of economic growth, especially from 2020 to 2023, resulted in cigarettes becoming more affordable. Specifically, affordability increased by 13%, 14%, and 7% each year, respectively. Industry pricing strategies also contributed to this increased affordability. Similarly, for low-income smokers, affordability was decreasing until 2019, but this trend has reversed, and 35 fewer minutes of labor were needed in 2023 to purchase a pack of the cheapest brand. The findings also show that a 10% reduction in affordability would decrease cigarette consumption by between 6.8% and 8.9%. Low- and middle-income households are even more sensitive to changes in affordability. The policy brief concludes with recommendations for policy makers to significantly raise excise taxes to reduce affordability and, thus, cigarette consumption.

A corresponding Working Paper can be found here.