The Crowding-Out Effect of Tobacco Consumption in Indonesia

This Report was written by the Center for Indonesia's Strategic Development Initiatives (CISDI) in Indonesia. The report examines the impact of tobacco consumption on household budgets, as well as the effect of reducing tobacco spending. Currently, smoking households spend around 11% of their monthly budgets on cigarettes. The researchers find that this decreases spending on other commodities, including necessities, especially among low-income groups. Smoking households dedicate a lower share of their budgets to food, housing, and health care. At the same time, tobacco expenditure is associated with increased spending on beverages, such as sugar-sweetened beverages, and ready-made foods. These differences result in a lower daily nutrition intake in smoking households and may threaten the development of youth. The study also simulates the impact of a 50% decrease in tobacco spending. As a result, spending on food staples and meat would increase by 14% and 35%, respectively, in addition to a 24% increase in spending on housing, and a 31% increase in spending on education. The report concludes with recommendations for more effective tobacco control policies to reduce the negative impact of tobacco spending on households.

A Policy Brief based on the report can be found here.