Crowding Out Effect of Tobacco Usage on Household Education and Health Expenditures - An Econometric Analysis

Tobacco consumption is growing day by day everywhere in the world in countless forms such as supari, tobacco raw, chew, pan, cigarettes, bidi and naswar etc. Tobacco consumption may avert the limited family resources far away from advantageous uses between low-slung income households. The relatively underprivileged households frequently allocate an ample share of the domestic budget on tobacco expenditures. These uneconomical expenditures on tobacco could be a diversion of household monetary resources from necessary things, such as foodstuff, healthcare and education. Explicitly this paper discovers the crowding-out impact of tobacco expenditures on a household’s education and health payouts. The facts for this study has been engaged from HIES (Household Integrated Economic Survey) conducted regularly by PBS (Pakistan Bureau of Statistics) that offers evidence at household level and covered the whole nation. The estimation has been carried out by employing the Engel Curves, the quadratic terms using QUAIDS (Quadratic Almost Ideal Demand System) were found to be empirically important in describing household budget behavior. By employing data on outlays, study evaluated a user demand structure that comprises numerous main spending classifications (tobacco, education and healthcare). OLS (Ordinary Least Square) was used to estimate the effect of tobacco outlay and other covariates on share of education and health in the total budget of a household. The results found out were just alike John (2006) that a rise in the tobacco expenditure brings a reduction in the budget quota dedicated to health and education. The quantitative results aim to help the policy makers to formulate and apply such policies to restrict the consumption of tobacco products and diverting those expenses for the formation of human capital by increased spending on health and education.