The effect of tobacco- and alcohol-control policies on household spending patterns in Kenya: An approach using matched difference in differences

This paper examines the effect of tobacco and alcohol control policies on tobacco and alcohol consumption patterns and the evolution of crowding-out effects on other household expenditure in Kenya. The current literature on crowding-out does not provide a defensible instrumental variable for a system of demand equations. This paper uses Matched Difference in Differences (MDID) as an alternative strategy and data from two nationally representative surveys in Kenya conducted ten years apart (2005/6 and 2015/16). We find that tobacco-control policies contributed to a decrease in the proportion of tobacco-consuming households between 2005 and 2015. Alcohol-control policies were only effective in reducing the proportion of alcohol-consuming households in the bottom quartile of the expenditure distribution. Overall, tobacco-consuming households spent less on education, communication, and some food items. Alcohol-consuming households also spent less on some food items, but expenditure on transportation was the only non-food item crowded out. Tobacco and alcohol control policies, when they result in reduced consumption of these products, can increase household expenditure on human capital development in the long run.