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Abstract
Background Tobacco consumption is pervasive in Indonesia, with 6 out of 10 households in the country consuming tobacco. Smoking households, on average, divert a significant share (10.7%) of their monthly budget on tobacco products, which is higher than spending on staples, meat or vegetables. Nevertheless, evidence of the causal link between tobacco expenditure and spending on other commodities in Indonesia is limited.
Objective This study aims to estimate the crowding-out effects of tobacco spending on the expenditure of other goods and services in Indonesia.
Method This research estimates the conditional Engel curve with three-stage least square regression, where the instrumental variable technique is applied to address the simultaneity of tobacco and total non-tobacco spending. The study employs a large-scale household budget survey from the Indonesian socioeconomic survey (Susenas) from 2017 to 2019, comprising over 900 000 households.
Finding Tobacco spending crowds out the share of a household’s budget allocated for food, such as spending on staples, meat, dairy, vegetables and fruits. Moreover, tobacco spending also reduces the share of expenditure spent on non-food commodities, such as clothing, housing, utilities, durable and non-durable goods, education, healthcare and entertainment, although its effect is not as large as the crowding out on food. The analysis shows that the crowding-out effects of tobacco are observed across low-income, middle-income and high-income households. In addition, the simulation suggests that reducing tobacco expenditure will increase household spending on essential needs.
- Economics
- Low/Middle income country
- Price
- Socioeconomic status
Data availability statement
Data may be obtained from a third party and are not publicly available. The data are procured from Statistic Indonesia, and they cannot be shared with third parties due to copyright protection.
This is an open access article distributed in accordance with the Creative Commons Attribution 4.0 Unported (CC BY 4.0) license, which permits others to copy, redistribute, remix, transform and build upon this work for any purpose, provided the original work is properly cited, a link to the licence is given, and indication of whether changes were made. See: https://creativecommons.org/licenses/by/4.0/.
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Data availability statement
Data may be obtained from a third party and are not publicly available. The data are procured from Statistic Indonesia, and they cannot be shared with third parties due to copyright protection.
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Footnotes
X @farizazahrak, @dewawisana
Contributors IDGKW is responsible for the overall content and is the guarantor of this paper. AS, FZK, IDGKW, YM and GK conceived and developed the research design. AS, FZK and IDGKW conducted the data analysis. AS, YM and GK wrote the manuscript.
Funding Center of Indonesia’s Strategic Development Initiatives (CISDI) is funded by the Institute for Health Research and Policy at the University of Illinois Chicago (UIC) to conduct economic research on tobacco taxation in Indonesia. UIC is a partner of the Bloomberg Initiative to Reduce Tobacco Use.
Disclaimer The views expressed in this document cannot be attributed to, nor do they represent, the views of the Institute for Health Research and Policy, UIC or Bloomberg Philanthropies.
Competing interests None declared.
Provenance and peer review Not commissioned; externally peer reviewed.
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