Abstract

This study focused on determinants of cigarettes demand in Kenya for the period 1970 to 2005. Myopic addiction model of cigarettes demand was used to capture the addictive nature of cigarettes demand. Ordinary Least Squares (OLS) and Maximum likelihood ARCH (ML-ARCH) estimation methods were used to estimate the long run cointegrating myopic cigarettes demand model. Furthermore, short run myopic error correction cigarette demand model was also estimated using OLS. The estimated long-run results indicated that cigarette prices have a significant and negative effect on cigarette consumption per capita; this implies that the government can easily manipulate cigarette prices by increasing excise tax. ML-ARCH estimation confirmed the existence of a positive and significant myopic relationship between past and current cigarette consumption per capita. Real income per capita was statistically significant and had negative effect on cigarette consumption per capita in the long run. Health warning labels were found to be effective in reducing cigarettes demand both in the short run and in the long run. Advertising also was found to have a significant effect in promoting the use of tobacco (cigarettes) in Kenya. Generally increase in excise tax, which is transmitted through the price factor and prominent health warning labels on the cigarette packs are the major advocated policy reaction from the study in controlling cigarettes (tobacco) use in Kenya.

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School	: School of Law, Economics and Government
Issued Date	: 2007

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