Error Correction Model Analysis of Tobacco Consumption in Kosovo
Abstract: Information for cigarette consumption during the time period 2005-2017, was utilized to assess the price and income elasticity effects on smoking intensity in Kosovo. The analysis was conducted by applying the error-correction model to estimate both the long-term and short-term smokers’ sensitivity to changes in price and income. The study revealed that the short run price elasticity is -0.33, and -0.68 in the long run. Contrary to the price effect, income shows positive correlation to cigarette consumption in Kosovo. Based in the information revealed, it can be concluded that increasing taxes on cigarette results in lower consumption at the macro level.
Keywords:error correction model, tobacco products, elasticity, cigarette consumption
*References to Kosovo shall be understood to be in the context of Security Council Resolution 1244 (1999).