Demonstrating the utility of system dynamics for public policy analysis in New Zealand: the case of excise tax policy on tobacco

This paper summarises a system dynamics pilot study analysing the relationship of New Zealand Customs Service (NZCS) outputs to desired government outcomes, in relation to the collection of tobacco excise duties and cigarette smoking in New Zealand. The study was done to demonstrate the utility of system dynamics in answering some questions of a type common in the New Zealand public sector during policy development and review. Group model-building workshops addressed the organising question: ‘How does price influence the use and consequences of tobacco in New Zealand?’ A prototype system dynamics simulation model using the ithink dynamic simulation software was developed, consisting of seven sectors: NZCS air and marine sector; duty-paid cigarette imports; duty-free cigarettes; New Zealand tobacco manufacturing sector; NZCS duty collection (from air passengers); New Zealand tobacco products market; and a health sector. The model simulates values of the model variables on an annual basis from 2000 to 2010. Policy experiments with the model include examining the effects of changes in excise duties. The model can be further developed to examine tobacco-related public policy issues in New Zealand and complement modelling done in other countries.