Abstract
Using a nationally representative household-level dataset on consumption expenditure, this paper examines the crowding-out effects of tobacco and alcohol spending on food and non-food consumption in rural India. We found a positive relationship between spending on these temptation goods and household income, but in proportionate terms the poor and socially-disadvantaged households spent more on such goods compared to others. In general, their consumption crowded out food expenditure but not as much as non-food expenditure. Tobacco expenditure crowded out more of consumer durables followed by foodgrains, healthcare and education. However, among the poor, foodgrains were traded-off more. Likewise, spending on alcohol also crowded out foodgrains, but the effects were larger for consumer durables and starker among the poor. Across social groups too, consumption of tobacco as well as alcohol led to a reallocation of budgets with consumer durables being most displaced followed by foodgrains. On the whole, the crowding out effects were larger for tobacco than alcohol and were greater for households belonging to the lower rungs of both income and social order. We identified that such crowding-out effects operated through peer effects or social interactions; hence the key inference is that government interventions aimed towards controlling tobacco or alcohol consumption would be more effective if these targeted peer groups and their group leaders.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Banerjee and Mullainathan (2010) term tobacco and alcohol as ‘temptation goods’ because their consumption generates positive utility for an individual in the present moment but generates disutility in the future.
Pan is a preparation combining betel leaf with arecanut and sometimes tobacco. Foodgrains include cereals and their substitutes and pulses and their products. Animal products include milk, milk products and other products such as egg, fish and meat. Fruits and vegetables incorporate both dry and fresh fruits. The category processed and other foods comprise both served and packaged processed foods besides other food items such as salt, sugar and spices. Durable goods include clothing, bedding, footwear, toiletries etc. Medical or healthcare expenses include both institutional and non-institutional expenses. The differentiation between institutional and non-institutional expenses depends on whether they were incurred as an in-patient of a medical institution or otherwise.
Bidi is consumed more in rural areas, which is a result of its low per unit price and low incomes of the rural people. About 43% of the rural tobacco consumers report to smoke bidis as compared to 31% of their urban counterparts. The incidence of cigarette smoking is higher in urban areas (29%) than in rural areas (16%). Similarly, about half of the rural population consumes country liquor as compared to 37% of their urban counterparts. The incidence of consumption of refined liquor is higher in urban (43%) than in rural areas (28%).
Refer to Table ES.1(a) and 1(b) of the electronic supplementary material for the complete set of results.
F-test of excluded instruments and Angrist-Pischke multivariate F test of excluded instruments.
Refer to Table ES. 2(a) - 2(d) of the electronic supplementary material for complete results on income and social classes, respectively.
References
Akerlof, G. (1997). Social Distance and Social Decisions. Econometrica, 65(5), 1005–1027.
Anderson, P., & Baumberg, B. (2006). Alcohol in Europe – A public health perspective. A report for the European Commission. England: Institute of Alcohol Studies.
Banerjee, A., & Duflo, E. (2007). The Economic Lives of the Poor. Journal of Economic Perspectives, 21(1), 141–167.
Banerjee, A., & Mullainathan, S. (2010). The shape of temptation: implications for the economic lives of the poor. National Bureau of Economic Research (NBER), May 2010, Working Paper No. 15973.
Banks, J., Blundell, R., & Lewbel, A. (1997). Quadratic Engel curves and consumer demand. The Review of Economics and Statistics, 79(4), 527–539.
Bask, M., & Melkersson, M. (2004). Rationally addicted to drinking and smoking. Applied Economics, 36, 373–381.
Bouregois, J. C., & Barnes, J. G. (1979). Does advertising increase alcohol consumption? Journal of Advertising Research, 19(4), 19–29.
Browning, M., & Meghir, C. (1991). The effects of male and female labour supply on commodity demands. Econometrica, 59(4), 925–951.
Chelwa, G., & Walbeek, C. (2014). Assessing the causal impact of tobacco expenditure on household spending patterns in Zambia. Economic Research Southern Africa (ERSA) working paper 453, August 2014.
Curran, P. J., Stice, E., & Chassin, L. (1997). The relation between adolescent alcohol use and peer alcohol use: A longitudinal random coefficients model. Journal of Consulting and Clinical Psychology, 65(1), 130.
Deaton, A., & Subramanian, S. (1996). The Demand for Food and Calories. Journal of Political Economy, 104(1), 133–162.
Decker S. L., & Schwartz A. E. (2000). Cigarettes and alcohol: substitutes or complements? NBER Working Paper 7535.
Efroymson, D., Ahmed, A., Townsend, J., Alam, S. M., Dey, A. R., Saha, R., Dhar, B., Sujon, A. I., Ahmed, K. U., & Rahman, O. (2001). Hungry for tobacco: an analysis of the economic impact of tobacco consumption on the poor in Bangladesh. Tobacco Control, 10, 212–217.
Fanelli, L., & Mazzocchi, M. (2004). Back to the future? Habits and forward-looking behaviour for UK alcohol and tobacco demand. MIMEO: Università degli Studi di Bologna.
Gaviria, A., & Raphael, S. (2001). School-based peer effects and juvenile behaviour. Review of Economics and Statistics, 83, 257–268.
Goel, R. K., & Morey, M. J. (1995). The interdependence of cigarette and liquor demand. Southern Economic Journal, 2(2), 451–459.
John, R. M. (2008). Crowding out effect of tobacco expenditure and its implications on household resource allocation in India. Social Science & Medicine (1982), 66(6), 1356–1367.
Jones, A. M. (1989). A systems approach to the demand for alcohol and tobacco. Bulletin of Economic Research, 41(2), 85–106.
Jones, A., & Mazzi, M. (1996). Tobacco consumption and taxation in Italy: an application of the QUAIDS model. Applied Economics, 28, 595–603.
Kang, H. Y., Kim, H. K., Park, T. K., Jee, S. H., Nam, C. M., & Park, H. W. (2003). Economic burden of smoking in Korea. Tobacco Control, 12, 37–44.
Koch, S. F., & Tshiswaka-Kashalala, G. (2008). Tobacco substitution and the poor. University of Pretoria Working Paper Series no. 2008–32.
Kremer, M., & Levy, D. (2008). Peer effects and alcohol use among college students. Journal of Economic Perspectives, 22(3), 189–206.
Laibson, D. (2001). A Cue-Theory of Consumption. Quarterly Journal of Economics, 116(1), 81–119.
Liu, Y., Rao, K., Hu, T. W., Sun, Q., & Mao, Z. (2006). Cigarette smoking and poverty in China. Social Science and Medicine, 63, 2784–2790.
Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty impedes cognitive function. Science, 341(6149), 976–980.
Max, W., Rice, D. P., Sung, H. Y., Zhang, X., & Miller, L. (2004). The economic burden of smoking in California. Tobacco Control, 13, 264–267.
Norton, E. C., Lindrooth, R. C., & Ennett, S. T. (1998). Controlling for the endogeneity of peer substance use on adolescent alcohol and tobacco use. Health Economics, 7, 439–453.
NSSO (National Sample Survey Office). (2013). Consumption Expenditure Survey, 68th Round (2011–12), CD, Ministry of Statistics and Programme Implementation, Government of India.
Pollak, R. A. (1969). Conditional demand functions and consumption theory. Quarterly Journal of Economics, 83(1), 60–68.
Powell, L. M., Tauras, J. A., & Ross, H. (2005). The importance of peer effects, cigarette prices and tobacco control policies for youth smoking behaviour. Journal of Health Economics, 24, 950–968.
Pu, C., Lan, V., Chou, Y.-J., & Lan, C. (2008). The crowding-out effects of tobacco and alcohol where expenditure shares are low: Analyzing expenditure data for Taiwan. Social Science and Medicine, 9, 1979–1989.
Reifman, A., Barnes, G. M., Dintcheff, B. A., Farrell, M. P., & Uhteg, L. (1998). Parental and peer influences on the onset of heavier drinking among adolescents. Journal of Studies on Alcohol, 59, 311–317. doi:10.15288/jsa.1998.59.311.
Sacks, J. J., Roeber, J., Bouchery, E. E., Gonzales, K., Chaloupka, F. J., & Brewer, R. (2013). State costs of excessive alcohol consumption, 2006. Am J Preventive Med., 45, 474–485.
Su, S., & Yen, S. (2000). A Censored System of Cigarette and Alcohol Consumption. Applied Economics, 32, 729–737.
Tauchmann, H., Göhlmann, S., Requate, T., & Schmidt, C. M. (2006) Tobacco and alcohol: complements or substitutes? - A statistical guinea pig approach. RWI Discussion Paper No. 52.
Thamarangsi, T. (2006). Thailand: Alcohol today. Addiction, 101, 783–787.
Thomson, G. W., Wilson, N. A., O’Dea, D., Reid, P. J., & Howden-Chapman, P. (2002). Tobacco spending and children in low income households. Tobacco Control, 11(4), 372–375.
Vermeulen, F. (2003). Do smokers behave differently? A tale of zero expenditures and separability concepts. Economics Bulletin, 4(6), 1–7.
Wang, H., Sindelar, J. L., & Busch, S. H. (2006). The impact of tobacco expenditure on household consumption patterns in rural China. Social Science & Medicine, 62(6), 1414–1426.
Warner, E. K. (2014). Death and taxes: using the latter to reduce the former. Tobacco Control, 23, i4–i6. doi:10.1136/tobaccocontrol-2013-051079.
WHO (World Health Organization). (2014a). Tobacco control economics. http://www.who.int/tobacco/economics/background/en/
WHO (World Health Organization). (2014b). Global status report on alcohol and health. World Health Organization.
Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data. MIT Press.
Yao, T., Huang, J., Sung, H., Ong, M. K., Mao, Z., Jiang, Y., Fong, G. T., & Wendy, M. (2014). Determinants of smoking-induced deprivation in China. Tobacco Control. doi:10.1136/tobaccocontrol-2014-051542.
Acknowledgment
We would like to thank the editor and anonymous reviewers for their insightful and constructive comments. We are grateful to Jeffrey Wooldridge, J.M.C Santos Silva, Rijo M. John, Bharat Ramaswami, Devesh Roy and Digvijay S. Negi for their valuable suggestions. The assistance received from Vister Joshi is also appreciated. We also acknowledge the valuable support of staff of ICAR-NIAP. The views expressed are those of the authors and do not necessarily reflect the views or policies of their organization while errors or omissions are the sole responsibility of authors.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The authors declare that this manuscript is original, has not been published before and is not currently being considered for publication elsewhere. We further wish to confirm that there are no known conflicts of interest associated with this publication and there has been no financial support for this work that could have influenced its outcome. The manuscript has been read and approved by all named authors. We further confirm that the order of authors listed in the manuscript has been approved by all of us. We confirm that we have given due consideration to the protection of intellectual property associated with this work and that there are no impediments to publication, including the timing of publication, with respect to intellectual property.
Electronic supplementary material
ESM 1
(PDF 390 kb)
Appendix
Appendix
Rights and permissions
About this article
Cite this article
Jumrani, J., Birthal, P.S. Does consumption of tobacco and alcohol affect household food security? Evidence from rural India. Food Sec. 9, 255–279 (2017). https://doi.org/10.1007/s12571-017-0660-8
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s12571-017-0660-8