Tobacco Spending and its Crowd-Out of Other Goods
Smoking is an expensive habit. Smoking households spend, on average, more than $1000 annually on cigarettes. For households in which some members smoke, smoking expenditures crowd-out other purchases, which may affect other household members, as well as the smoker. We empirically analyze how expenditures on tobacco crowd out consumption of other goods, estimating the patterns of substitution between tobacco products and other expenditures. We use the Consumer Expenditure Survey (1995 to 2001), which we complement with regional price data, and state cigarette prices. We estimate a consumer demand system of expenditures on cigarettes, food, alcohol, housing, apparel, transportation, medical care and controls for socio-economic variables and other sources of observable heterogeneity. Descriptive data indicate that, compared to non-smokers, smokers spend less on housing. Results from the demand system indicate that as the price of cigarettes rises, households increase the quantity of food purchased, and, in some samples, reduce the quantity of apparel and housing purchased.
|Date of creation:||Dec 2004|
|Publication status:||published as Busch, Susan H., Mireia Jofre-Bonet, Tracy A. Falba, and Jody L. Sindelar. "Burning a Hole in the Budget: Tobacco Spending and Its Crowd-Out of Other Goods." Applied Health Economics and Health Policy 3, 4 (2004): 263-72.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lisa Barrow & Leslie McGranahan, 1999.
"The earned income credit and durable goods purchase,"
Working Paper Series
WP-99-24, Federal Reserve Bank of Chicago.
- Lisa Barrow & Leslie Moscow McGranahan, 2000. "The Earned Income Credit and Durable Goods Purchases," JCPR Working Papers 144, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Jones, Andrew M, 1989. "A Systems Approach to the Demand for Alcohol and Tobacco," Bulletin of Economic Research, Wiley Blackwell, vol. 41(2), pages 85-105, April.
- Chaloupka, Frank J. & Warner, Kenneth E., 2000. "The economics of smoking," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 29, pages 1539-1627 Elsevier.
- Frank J. Chaloupka & Kenneth E. Warner, 1999. "The Economics of Smoking," NBER Working Papers 7047, National Bureau of Economic Research, Inc.
- Sandra L. Decker & Amy Ellen Schwartz, 2000. "Cigarettes and Alcohol: Substitutes or Complements?," NBER Working Papers 7535, National Bureau of Economic Research, Inc.
- Nicholas S. Souleles, 1999. "The Response of Household Consumption to Income Tax Refunds," American Economic Review, American Economic Association, vol. 89(4), pages 947-958, September.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762. Full references (including those not matched with items on IDEAS)