Inequality and crowding-out effect of alcohol expenditure in Vietnam: Evidence from Vietnam household living standards surveys 2014 – 2020

This study investigates the inequality and crowding-out effects of alcohol expenditure among Vietnamese households using nationally representative data from the Vietnam Household Living Standards Survey (VHLSS) from 2014 to 2020. The analysis reveals that while alcohol spending increased across all income quintiles, the growth rate was most pronounced among lower- and middle-income households. Despite this trend, higher-income households consistently recorded the highest absolute levels of alcohol expenditure, both at the household and per capita levels. Using the Concentration Index and Kakwani’s progressivity index, the study finds that alcohol spending is disproportionately concentrated among the wealthy but remains regressive relative to income, implying a heavier relative burden on lower-income households. To assess the economic implications of this spending pattern, the study applies a Generalized Method of Moments Three-Stage Least Squares (GMM-3SLS) estimator for Engel curves. The results indicate a significant crowding-out effect: increased alcohol expenditure is associated with reduced spending on essential items such as food, healthcare, education, and housing, with generally stronger crowding-out effects among low- and middle-income households. In contrast, alcohol expenditure is positively associated with spending on tobacco, transportation, and fuel, suggesting complementary consumption patterns. These findings suggest the need for alcohol control policies that reduce affordability, strengthen regulatory enforcement, and protect vulnerable households from the welfare consequences of alcohol spending. The study contributes to alcohol policy discussions and broader efforts to reduce poverty, inequality, and health risks in Vietnam and other low- and middle-income countries.