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The Impact of Tobacco Use on Household Consumption Patterns in Pakistan – SPDC

Social Policy and Development Centre May 2020

Executive Summary

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 mhousehold 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 Survey 2015Ȃ16.

The key findings of this analysis are the following:

  • 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.

Author
Wasim Saleem Muhammad Asif Iqbal Social Policy and Development Centre May 2020