Cigarette Affordability in North Macedonia [Working Paper Series]

This Working Paper was written by Analytica in North Macedonia. The working paper examines trends in cigarette affordability using retail price data and household survey data. The authors consider minutes of labor required to purchase a pack of cigarettes, relative income price (RIP), and the ratio of income growth to cigarette price growth to assess affordability. From 2014 to 2023, the minutes of work required to purchase a cigarette pack increased from 26.8 to 37.5. The findings suggest that cigarettes still remain highly affordable with real income growth outpacing price increases. In 2021, in particular, GDP per capita and wages grew substantially faster than cigarette prices, despite excise adjustments. On the other hand, a 10% reduction in affordability would decrease consumption by 7.9%, 5.9%, and 6.4% in low-, middle-, and high-income groups, respectively. Analyzing the macro level data similarly finds a long-run affordability elasticity of -0.62. The working paper concludes with recommendations for policy makers to implement substantial and regular cigarette tax increases to effectively reduce affordability and consumption. 

A corresponding Policy Brief can be found here.