Research Article: The crowding-out effect of tobacco expenditure on household spending patterns in Bangladesh

Date Published: October 9, 2018

Publisher: Public Library of Science

Author(s): Muhammad Jami Husain, Biplab Kumar Datta, Mandeep K. Virk-Baker, Mark Parascandola, Bazlul Haque Khondker, Rachel A. Nugent.


Tobacco consumption constitutes a sizable portion of household consumption expenditure, which can lead to reduced expenditures on other basic commodities. This is known as the crowding-out effect. This study analyzes the crowding-out effect of tobacco consumption in Bangladesh, and the research findings have relevance for strengthening the tobacco control for improving health and well-being.

We analyzed data from the Bangladesh Household Income and Expenditure Survey 2010 to examine the differences in consumption expenditure pattern between tobacco user and non-user households. We further categorize tobacco user households in three mutually exclusive groups of smoking-only, smokeless-only, and dual (both smoking and smokeless); and investigated the crowding-out effects for these subgroups. We compared the mean expenditure shares of different types of households, and then estimated the conditional Engel curves for various expenditure categories using Seemingly Unrelated Regression (SUR) method. Crowding-out was considered to have occurred if estimated coefficient of the tobacco use indicator was negative and statistically significant.

We find that tobacco user households on average allocated less in clothing, housing, education, energy, and transportation and communication compared to tobacco non-user households. The SUR estimates also confirmed crowding-out in these consumption categories. Mean expenditure share of food and medical expenditure of tobacco user households, however, are greater than those of tobacco non-user households. Albeit similar patterns observed for different tobacco user households, there were differences in magnitudes depending on the type of tobacco-use, rural-urban locations and economic status.

Policy measures that reduce tobacco use could reduce displacement of commodities by households with tobacco users, including those commodities that can contribute to human capital investments.

Partial Text

Tobacco use is among the leading causes of preventable premature deaths and disabilities, globally. Smoking tobacco harms nearly every organ of the body, impairs immune function, causes inflammation, and increases risk for deaths from all causes in men and women [1]. Smokeless tobacco use can cause cancer of mouth, esophagus, and pancreas, increase risks for early delivery and stillbirth during pregnancy, lead to nicotine addiction and nicotine poisoning in children, and increase risk of deaths from cardiovascular diseases [2, 3]. The tobacco epidemic kills more than 7 million people each year globally; and more than two-thirds of the more than 1 billion smokers worldwide live in low and middle-income countries [4].

The deleterious effects of tobacco consumption, including smoking tobacco, smokeless tobacco, and passive smoking, on health is well-documented [1, 2, 3]. The tobacco-attributable deaths, disabilities, and diseases cause enormous economic tolls on individuals, households, and society. These economic costs are described as direct medical costs for the individuals and families, and consequent strain on the national level healthcare finances, as well as indirect costs due to absenteeism and presenteeism for the earners and informal caregivers, constrained education attainments school attendance and learning, and consequent lost productivity at the macro level. Another mechanism through which tobacco use can negatively impact well-being of tobacco users and family members is due to displacement of consumption of other basic necessities due to expenditure on tobacco, generally described in the literature as the ‘crowding-out effect’ [13]. Given fixed household budget, the displacements often occur for items that constitute human capital investments (e.g. food and nutrition, education, health and hygiene, housing etc.) rendering life-course implications on household well-being.




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