Crowding out effect of tobacco expenditure and its implications on household resource allocation in India

This paper examines whether spending on tobacco crowds out expenditure on basic needs and whether it has implications on nutrition intake and household resource allocation in India. The paper uses a household sample survey from India for the year 1999–2000. A system of quadratic conditional Engel curves was estimated for a set of 10 broad groups of commodities. The results suggest that tobacco consuming households had lower consumption of certain commodities such as milk, education, clean fuels and entertainment which may have more direct bearing on women and children in the household than on men suggesting possible ‘gender effects’ and biases in the allocation of goods and services within the household. Tobacco spending was also found to have negative effects on per capita nutrition intake. The nature of crowding out was found to be similar in low- and high-income households.