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Crowding-out effect of tobacco expenditure and its implications on intra-household resource allocation

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  • Rijo John

    ()
    (Indira Gandhi Institute of Development Research)

Abstract

The aim of this paper is to examine if tobacco consumption crowds-out consumption of basic needs and whether it has implications for nutrition intake and intra-household resource allocation in developing countries. In the process we also examine whether preference over other commodities for tobacco users and non users vary significantly. Using a nationally representative household sample survey from India for the year 1999-2000, we analyze the pattern of spending on various groups of commodities by the status of tobacco consumption of households. Average per capita per diem intake of nutrients such as calorie, fat and protein were reported to be lower among the high tobacco spending group of households vis-`a-vis the no-spending category. A system of quadratic conditional Engel curves was estimated for a set of ten broad groups of commodities. Separability between tobacco and most other goods was rejected. The results suggest that tobacco consuming households had lower consumption of certain commodities such as milk, clean fuels and entertainment which has direct bearing on mostly children and female members in the household suggesting possible `gender effects' and biases in intra-household resource allocation. Tobacco spending also found to have negative effects on household nutrition intake.

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Bibliographic Info

Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2006-002.

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Length: 29 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:ind:igiwpp:2006-002

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Keywords: tobacco; consumption; poverty; crowd-out; India;

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References

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  1. John, Rijo M., 2005. "Tobacco consumption patterns and its health implications in India," Health Policy, Elsevier, vol. 71(2), pages 213-222, February.
  2. Keen, Michael, 1986. "Zero Expenditures and the Estimation of Engel Curves," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(3), pages 277-86, July.
  3. Deaton, Angus S & Ruiz-Castillo, Javier & Thomas, Duncan, 1989. "The Influence of Household Composition on Household Expenditure Patterns: Theory and Spanish Evidence," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 179-200, February.
  4. repec:ebl:ecbull:v:4:y:2003:i:6:p:1-7 is not listed on IDEAS
  5. Michael Parti & Cynthia Parti, 1980. "The Total and Appliance-Specific Conditional Demand for Electricity in the Household Sector," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 309-321, Spring.
  6. Bente Halvorsen & Bodil M. Larsen, 2003. "Possibility for hedging from price increases in residential energy demand," Discussion Papers 347, Research Department of Statistics Norway.
  7. Pollak, Robert A, 1969. "Conditional Demand Functions and Consumption Theory," The Quarterly Journal of Economics, MIT Press, vol. 83(1), pages 60-78, February.
  8. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
  9. Susan H. Busch & Mireia Jofre-Bonet & Tracy A. Falba & Jody L. Sindelar, 2004. "Tobacco Spending and its Crowd-Out of Other Goods," NBER Working Papers 10974, National Bureau of Economic Research, Inc.
  10. Frederic Vermeulen, 2003. "Do smokers behave differently? A tale of zero expenditures and separability concepts," Economics Bulletin, AccessEcon, vol. 4(6), pages 1-7.
  11. Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-51, July.
  12. Wang, Hong & Sindelar, Jody L. & Busch, Susan H., 2006. "The impact of tobacco expenditure on household consumption patterns in rural China," Social Science & Medicine, Elsevier, vol. 62(6), pages 1414-1426, March.
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Cited by:
  1. Ramaele Moshoeshoe, 2012. "Consumer demand for alcoholic beverages and tobacco in Lesotho: A double-hurdle approach," Working Papers 315, Economic Research Southern Africa.

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