Burning a hole in the budget: tobacco spending and its crowd-out of other goods.

Busch, Susan H

Jofre-Bonet, Mireia

Falba, Tracy A

Sindelar, Jody L

New Zealand

2010-12-08T20:38:00Z

2004

Smoking is an expensive habit. Smoking households spend, on average, more than $US1000 annually on cigarettes. When a family member quits, in addition to the former smoker's improved long-term health, families benefit because savings from reduced cigarette expenditures can be allocated to other goods. For households in which some members continue to smoke, smoking expenditures crowd-out other purchases, which may affect other household members, as well as the smoker. We empirically analyse how expenditures on tobacco crowd-out consumption of other goods, estimating the patterns of substitution and complementarity between tobacco products and other categories of household expenditure. We use the Consumer Expenditure Survey data for the years 1995-2001, which we complement with regional price data and state cigarette prices. We estimate a consumer demand system that includes several main expenditure categories (cigarettes, food, alcohol, housing, apparel, transportation, medical care) and controls for socioeconomic variables and other sources of observable heterogeneity. Descriptive data indicate that, comparing smokers to nonsmokers, 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.

This research was supported by grants from the Robert Wood Johnson Foundation (#039787).

http://www.ncbi.nlm.nih.gov/pubmed/15901200

349

1179-1896

https://hdl.handle.net/10161/2862

eng

en_US

Springer Science and Business Media LLC

Appl Health Econ Health Policy

Adult

Budgets

Costs and Cost Analysis

Data Collection

Family Characteristics

Female

Humans

Male

Models, Economic

Smoking

United States

Burning a hole in the budget: tobacco spending and its crowd-out of other goods.

Journal article

http://www.ncbi.nlm.nih.gov/pubmed/15901200

263

272

4

Duke

Economics

Trinity College of Arts & Sciences

Published

3