Browsing by Author "Banuelos, Kevin Joshua A."

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    Does tobacco and alcohol consumption crowd-out household expenditures in the Philippines?
    (2016-06) Banuelos, Kevin Joshua A. ; Mella, Dustin Jacob H. ; Pajaron, Marjorie C.
    Tobacco and alcohol consumption has two major adverse health effects: (1) direct effects to consumers who experience different illnesses such as lung cancer, and cerebro- vascular, heart and liver diseases (World Health Organization, 2003; National Institutes of Health, 2016); and (2) indirect effects brought about by negative externalities in the form of second-hand, third-hand smoking, and accidents related to drunk-driving, for example. There are also two types of costs related to the consumption of these two goods – direct costs through their purchase and indirect costs attributable to possibly crowding out the purchase and consumption of other goods such as food and education, which may lead to malnutrition, lower daily caloric intake, reduced human capital investment, and financial instability. The purpose of this study is to examine these indirect costs, in particular we aim to determine whether expenditures on tobacco and alcohol crowd-out expenditures on other goods. Using the 2009 Family Income and Expenditure Survey (FIES), we construct a system of Conditional Engel Curves from the Quadratic Almost Ideal Demand System (QUAIDS) to formulate the demand functions of 11 household expenditure categories. Ordinary Least Squares (OLS), Seemingly Unrelated Regressions (SUR), and Fractional Logit (Flogit) results show that the nature of the crowding-out effect differs across income groups, gender of the household head, and household location. Low-income households are the most severely affected, with their budget for food decreasing by almost 50% and other critical expenditures on basic needs also crowded-out. Although food expenditures are unaffected, middle-income households are still worse-off with their budget for education and rent on housing each crowded-out by more than 30%. The wealth of high-income households is also adversely affected, with their rate of saving declining by about 78% to compensate for tobacco and alcohol purchases. Further analysis also shows that male-headed households and urban households possibly experience the crowding-out effects more than female-headed households and rural households, respectively.