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ABSTRACT

The authors estimate an Engel curve for cigarette consumption in Japanese single households and compare it to that of family households. The study utilizes quarterly panel data for six regions for the period January 2002 through June 2011. The objective of the study was to evaluate and determine the cigarette consumption responsiveness of these household groups to expenditure changes, tax reforms, and other factors. Taking into account the short-term adjustment processes and long-term equilibrium, the authors adopt an error correction model as the analytic framework, where they estimate long- and short-term expenditure elasticities, tax effects, regional effects, and demographic effects. The estimation results show cigarette demand to be highly inelastic to expenditure changes in both household groups, both in the long- and short-term, confirming the findings of previous research. Cigarette tax increases were found to have no significant effect in reducing consumption in single households both in the long and short term, a result different from that of family households in Japan. [EconLit classification: D100, D120, D190].