The Impact of Tobacco Use on
Household Consumption Patterns
Pakistan has comparably high rates of tobacco consumption and tobaccorelated illness and disease. In addition, consumption of tobacco constitutes a
sizable portion of household expenditure. High tobacco expenditure leads to
reduced spending on other basic needs and thus has direct bearing on
household welfare. Analysis of household spending patterns is therefore
important for understanding the opportunity cost of tobacco use.
This study is the first attempt to estimate the impact of tobacco use on
consumption patterns of households in Pakistan and complements existing
work on the crowding out effect of tobacco expenditures in developing
economies. It also explores how reductions in tobacco expenditure affect
intra-household resource allocation. The study is based on quantitative
methods by using data from the Pakistan Household Integrated Economic
The key findings of this analysis are the following:
Ȉ In Pakistan, tobacco-spending households spend nearly three
percent of their monthly budget on tobacco, and poor households
devote more of their budget to tobacco relative to rich households.
- The study finds strong evidence of a crowding out effect in Pakistan,
in which a reduction in tobacco expenditure leads to an increase in
household spending on basic food items, health, education, housing,
household durables, leisure, and other commodities.
- The crowding out effect is more prominent in education and basic
food among lower-income households, while education and housing
are more affected among higher-income households.
- The simulation analysis suggests that a reduction in tobacco
expenditures by 50 percent would increase aggregate expenditures
on the abovementioned commodity groups by about 18 percent. For
lower-income households, the major share of this increase would be
devoted to education (35 percent) and basic food (25 percent).
The findings of this study highlight the importance of tobacco control policies
in Pakistan to reducing tobacco consumption and freeing up household
resources for other spending such as food and education. Moreover, given
the tobacco-poverty link, the study also recommends that tobacco control
measures be integrated into the poverty reduction policies and programs.