Escuela de graduados en Administración Pública y Política Pública

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Cost – effectiveness analysis health

This report estimates the cost-benefit ratio of tobacco excise tax in Mexico, considering its costs produced to the economy –less production and its inherited deadweight loss–and its benefits generated to public health –less health expenditure and more economical productivity. Estimations account that public expenditure destined to treat tobacco-attributable diseases is between $9.8 billion and $43.0 billion MXN per year. The Mexican economic census for year 2009 revealed that the tobacco industry produced around $33.4 billion MXN. This represent that, by itself, this market has externalities that could get larger than its gross production. Currently, IEPS (tobacco excise tax) promotes a reduction in tobacco consumption by increasing its price. Its overall economic impact has larger benefits –correcting externalities– than health disbursements– were not considered due to lack of information available. However, should this tax be still increased to reach the breakpoint where IEPS’s collection equals public health expenditure? If these expenditures are greater than tobacco industry’s gross production, what should the government do with it?