The crowding-out effect of tobacco expenditure on household spending patterns in Bangladesh

BACKGROUND: Tobacco consumption constitutes a sizable portion of household consumption expenditure, which can lead to reduced expenditures on other basic commodities. This is known as the crowding-out effect. This study analyzes the crowding-out effect of tobacco consumption in Bangladesh, and the research findings have relevance for strengthening the tobacco control for improving health and well-being. METHODS: We analyzed data from the Bangladesh Household Income and Expenditure Survey 2010 to examine the differences in consumption expenditure pattern between tobacco user and non-user households. We further categorize tobacco user households in three mutually exclusive groups of smoking-only, smokeless-only, and dual (both smoking and smokeless); and investigated the crowding-out effects for these subgroups. We compared the mean expenditure shares of different types of households, and then estimated the conditional Engel curves for various expenditure categories using Seemingly Unrelated Regression (SUR) method. Crowding-out was considered to have occurred if estimated coefficient of the tobacco use indicator was negative and statistically significant. RESULTS: We find that tobacco user households on average allocated less in clothing, housing, education, energy, and transportation and communication compared to tobacco non-user households. The SUR estimates also confirmed crowding-out in these consumption categories. Mean expenditure share of food and medical expenditure of tobacco user households, however, are greater than those of tobacco non-user households. Albeit similar patterns observed for different tobacco user households, there were differences in magnitudes depending on the type of tobacco-use, rural-urban locations and economic status. CONCLUSION: Policy measures that reduce tobacco use could reduce displacement of commodities by households with tobacco users, including those commodities that can contribute to human capital investments.