Abstract
This paper empirically identifies cross-price elasticities of betel nut and cigarette consumption in Taiwan based on the Central Bureau of Statistics demand model. It compares reduction of cigarette consumption as a result of the proposed Betel Nut Health Tax with reduction of betel nut consumption as a result of the Tobacco Health and Welfare Taxes levied in 2002 and 2006, in order to determine which tax is most effective. Results from a simulated comparative analysis indicate that the Betel Nut Health Tax reduces cigarette consumption to a much greater extent than the Tobacco Health and Welfare Taxes reduce betel nut consumption.
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