On the impacts of higher tobacco taxes in Argentina: a computable general equilibrium approach

Abstract

ObjectivesWe analyse the employment effects of increasing tobacco taxation in Argentina by building a computable general equilibrium (CGE) model.MethodsIn line with recent changes in tobacco taxation in the country, the CGE model simulates an increase in excise tax on cigarettes.ResultsThe results show that even a substantial increase in tobacco taxation induces a zero-net change in overall employment in the economy when the newly raised tax revenues are spent by the government on education, health or public infrastructure. Increased tobacco taxes may shift jobs from tobacco-related sectors to other sectors of the economy, but the overall impact on the total number of jobs is negligible.ConclusionsThe widely documented positive effects of higher tobacco taxes (including a healthier population, more productive workers, savings from avoided costs of medical treatment for tobacco-related diseases, reductions in the number of new young smokers, among others) would far outweigh the nearly null effect of higher taxes on total net employment.