Income Elasticity of Demand for Cigarettes: A Cross-Section Analysis

Empirical investigations seeking to determine the income elasticity of demand for cigarettes in the United States have been few, and have been based chiefly on time-series data. Their findings have been in general agreement, showing the income elasticity to be about 0.5 or 0.6. This article describes an investigation based on a cross-section approach using data from a recent survey of the Bureau of the Census on smoking characteristics in relation to income and other factors. A feature of this investigation is the disaggregation of demand data by age and sew. The income elasticity of demand for cigarettes obtained from this analysis is indicated to be lower than found by earlier investigators. These results are compared with those of previous studies, and some reasons are advanced for the differences