Estimation of Tobacco Products Price and Income Elasticity using Aggregate Data

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Olivera Jovanovic
Jovan Zubović
Marko Vladisavljević
Duško Bodrož
Isidora Ljumović
Ivana Domazet
Mihajlo Đukić


In order to estimate elasticity of demand for tobacco products authors of this paper used aggregate level data. Research among low and middle income countries over the world empirically showed that demand for tobacco products is usually inelastic. Analysis conducted in the Republic of Serbia showed that price elasticity ranged between -0.76 and -0.62 while income elasticity ranged between 0.34 and 0.39.  The main aim of this paper is to estimate long run and short run demand elasticity based on aggregate level data for period 2002-2016 using Error Correction model. This research is unique in the SEE countries, while research conducted in other low and middle income countries in Western Balkan region showed similar results.

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