Background Pakistan has a large population of tobacco users, with about 24 million adults consuming tobacco products in one form or another. There is a dearth of research on the impact of a reduction in tobacco use on Pakistan’s economy which can inform policy-makers on the extent that tobacco control measures would affect macroeconomic indicators such as output and employment.
Objectives The objective of this study is to quantify the changes in output, income and employment resulting from changes in cigarette consumption and to quantify the impact of such changes on the overall economy.
Methodology The study uses the input–output table for the fiscal year 2010–2011 for Pakistan’s economy, to estimate the output, income and employment multipliers. The Leontief input–output model is used to estimate the sectorwise multiplier effects. It estimates direct, indirect and consumption-induced effects of changes in tobacco use on the economy.
Results The cigarette industry’s share in large-scale manufacturing and industrial employment is 1.1% and 0.3%, respectively. The estimates of gross output, income and employment multipliers for the cigarette industry have relatively small magnitudes indicating minimal impact on the economy. A simulation analysis based on the latest estimates of price elasticity of cigarette and input–output multipliers, shows that a 10% increase in price will lead to an 11% reduction in cigarette consumption, which translates into annual savings of Pakistani Rupees (Rs) 16 billion by households. Reduction in cigarette consumption will allow individuals to spend their savings on other commodities. For example, spending this amount on food items will lead to a net increase of Rs 40 billion annual output of the economy.
Conclusion Reduction in tobacco consumption will lead to initial losses to the economy but there will be considerable gains in output, employment and income due to redistribution of tobacco expenditures.
- input-output table
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Contributors This article is based on research report entitled ‘Macroeconomic Impacts of Tobacco Use in Pakistan’. The authors are Research Associate and DMD, respectively, at the Social Policy and Development Centre (SPDC).
Funding SPDC is funded by the University of Illinois at Chicago’s (UIC) Institute for Health Research and Policy to conduct economic research on tobacco taxation in Pakistan. UIC is a core partner of the Bloomberg Philanthropies’ Initiative to Reduce Tobacco Use.
Disclaimer The views expressed in this document cannot be attributed to, nor do they represent, the views of UIC, the Institute for Health Research and Policy, or Bloomberg Philanthropies.
Competing interests None declared.
Patient consent for publication Not required.
Provenance and peer review Not commissioned; externally peer reviewed.
Data availability statement Data are available on reasonable request. the study uses input output table for Pakistan economy, these are developed by Federal Board of Revenue, Government of Pakistan.
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