Crowding-out Effect of Tobacco Expenditure And Its Implications on Intra-Household Resource Allocation

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Author: 
Rijo M John
Description: 
Working Paper Series No. WP-2006-002
JEL codes: 
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.