Research paper Tob Control: first published as 10.1136/tobaccocontrol-2019-055307 on 26 August 2020. Downloaded from Crowding- out effect of tobacco expenditure in Vietnam Ngoc- Minh Nguyen, Anh Nguyen Economics, Development ABStract goods, energy and so on.5 6 In addition, the oppor- and Policies Research Center Purpose This study aims at analysing the causal tunity cost of tobacco spending is more consider- (DEPOCEN), Hanoi, Viet Nam crowding- out effect of tobacco spending on able for households with a constrained budget. As a intrahousehold budget share in Vietnam. Besides, we result, smokers and their family members including Correspondence to Dr Anh Nguyen, Economics, also examine the differences in expenditure patterns women and children suffer the consequences of Development and Policies between tobacco spending households and non- tobacco use. Research Center, Hanoi, Viet spending households in Vietnam as well as determine The reduction of expenditure on basic goods due Nam; anhnguyen@ depocen. org the reason behind these differences. to tobacco spending is known as the crowding- out Methods We estimated a system of quadratic effect which leads to the deterioration in living Previous version of the 7 paper was presented at conditional Engel curve to determine intrahousehold standard and exacerbates effects of poverty. Liter- Tobacconomics Session, 12th resource allocation using the latest Vietnam Household ature on tobacco expenditure confirms the crowd- Vietnam Economist Annual Living Standard Survey data in 2016. In order to estimate ing- out effect of tobacco on household expenditure Meeting (VEAM 2019) at Da Lat the causal crowding- out effect of tobacco spending, using both descriptive statistics and econometric University. GMM 3SLS method is used to simultaneously deal with methods.5 6 8 Received 24 July 2019 heteroscedasticity and endogeneity problems. To establish the causal crowding- out effect of Revised 24 September 2019 Results Although the Wald test results propose the tobacco spending in India, John5 introduced an Accepted 26 September 2019 difference in preferences between tobacco spending and instrumental variable (IV) technique which has then non- spending households in Vietnam, once controlling been adopted to examine the crowding- out effect for household characteristics, the results from GMM in a series of developing countries such as Taiwan, 3SLS method show that the differences are insignificant. South Africa, Cambodia, Zambia, Turkey and Generally, the crowding- out effect of tobacco spending Bangladesh. More recently, the technique has been in Vietnamese households is modest because of the small codified into a toolkit—‘Using household Expen- share of tobacco in the total household expenditure. An diture Surveys for Research in the Economics of copyright. increase in tobacco expenditure only leads to a fall in Tobacco Control’.9 In this study, similar to previous the budget shares of education. The crowding- out effect, studies, we applied the method introduced in the however, mainly appears in the case of low- income Toolkit to examine the crowding- out effect in the households. case of Vietnam. Conclusions The reduction in education caused According to Global Adult Tobacco Survey by tobacco consumption, particularly in low- income conducted in Vietnam in 2015, Vietnam ranked households, may extend inequality and thus prevent among the top 15 countries in the world for tobacco http://tobaccocontrol.bmj.com/ the socioeconomic development in Vietnam in the long use with 15.6 million smokers. Nearly a half of male term. Additionally, the tiny share of tobacco in household adults in Vietnam are currently smoking tobacco. expenditure reveals that the price of tobacco products Besides, the number of non- smokers who are in Vietnam is extremely low, leading to high proportion exposed to secondhand smoking at workplace of tobacco smokers. Government, therefore, should and home are 5.9 million and 28.5 million people, continuously increase the tobacco tax so that it could respectively.10 restrict the tobacco affordability. The remarkable development record of Vietnam in recent years unfortunately increased the avail- ability and affordability of tobacco products. From 2005 to 2016, while nominal income per capital INTRODUCTION increased by 4.7 times, the retail price of the most on September 27, 2021 by guest. Protected The correlation between tobacco use and develop- popular Vietnamese tobacco products increased ment issues such as poverty and health problems are only by 2.2 times. In the same period, the rela- broadly recognised around the world.1 2 Without tive income price measured by the percentage of any intervention, tobacco use may cause one- third income required to purchase 100 packs of ciga- of deaths from vascular disease, half of the cancers rettes in Vietnam also decreases from 9% to only © Author(s) (or their and 60% of chronic respiratory diseases.3 World- 4.3%.11 employer(s)) 2019. No wide, more than 7 million deaths are related to Additionally, the tobacco tax in Vietnam remains commercial re- use. See rights and permissions. Published tobacco use every year and two- thirds of smokers as one of the lowest rates in the world at 41.6% 4 by BMJ. live in developing countries. of the retail price. After controlling for purchasing In fact, there are evidence that the burden created power parity, cigarette prices in Vietnam in 2015 To cite: Nguyen N- M, by tobacco use for developing countries is more were still ranked second lowest among 20 countries Nguyen A. Tob Control Epub ahead of print: [please severe than for developed countries. Besides the in the Western Pacific Region at only US$2.18 per 11 include Day Month Year]. negative effect on health, expenditure on tobacco pack. In short, the affordability of tobacco prod- doi:10.1136/ also creates a reduction in expenditure on basic ucts in Vietnam has constantly increased due to the tobaccocontrol-2019-055307 goods such as food, education, housing, durable inadequate tax policies on tobacco and the high Nguyen N- M, Nguyen A. Tob Control 2020;0:1–5. doi:10.1136/tobaccocontrol-2019-055307 1 Research paper Tob Control: first published as 10.1136/tobaccocontrol-2019-055307 on 26 August 2020. Downloaded from income growth which subdues the increase in price of tobacco Table 1 Summary statistics for averages and budget shares of products. tobacco expenditure In 2017, the total revenue of Vietnam Tobacco Corporation (Vinataba) reached over US$1 billion. However, the economic 2016 and health consequences of tobacco use are more considerable. Average annual expenditure Each year, there are more than 40 000 deaths from tobacco- on tobacco Share of tobacco ('000VND) expenditure (%) Sample size related diseases such as cancers, cardiovascular disease and chronic respiratory diseases. Without any policy intervention, All incomes 1878.906 1.92 4100 the number of deaths caused by tobacco use is estimated to be Low income 1170.729 2.19 1053 as high as 70 000 in 2030. The economic cost caused by tobacco Middle income 1873.722 2.02 1756 use in 2011 was estimated to be US$1173.2 million, equivalent High income 2463.579 1.56 1291 to 0.97% of the gross domestic product (GDP).12 It could be *US$1 = 22.700 VND. said that the contribution of tobacco industry is insufficient to neutralise the health damages and economic loss of tobacco use. Additionally, the estimated expenditure on tobacco products of household members, household income, expenditure, asset, in 2015 for Vietnam was approximately US$1400 million which housing and facilities. In our analysis, we focus on the latest data, is approximately equivalent to 0.72% of GDP (calculated by the VHLSS 2016. authors using data from Tobacco Taxes in Vietnam: Questions As the nationally representative and official household and Answer, 2018). In the meantime, the government expendi- consumption survey in Vietnam, VHLSS collects household ture on health in the same year is 5.62% of GDP (Source: World expenditures of nearly 200 food and non- food items. Based on Health Organization Global Health Expenditure database). It is the detailed data of expenditure in VHLSS, we construct nine reasonable to expect that similar to other developing countries, subgroups including food, health, education, clothes, durable tobacco consumption in Vietnam may also have the crowding goods, housing, entertainment, electricity and energy, alcohol effect on other household expenditure items. However, to our and tobacco following John.5 Depending on the purpose of knowledge, there has been no research measuring the crowd- expenditures, expenditures on non- food items are asked over ing- out effect of tobacco on household expenditure in Vietnam. last 30 days before the survey or over last 12 months. In the case We cover nine expenditure categories in our analysis (ie, of food, both information of monthly expenditure and expendi- food, health, education, clothes, durable goods, housing, enter- ture on holidays are collected. While monthly food expenditures tainment, electricity and energy, alcohol and tobacco) using the are asked over last 30 days before the survey, expenditures on holidays are over last 12 months. In this study, all consumption data from the latest Vietnam Household Living Standard Survey copyright. (VHLSS) in 2016. Applying the IV approach, we found that expenditures are converted in average yearly values. increases in tobacco spending lead to reduction in the share of A dummy variable taking values ‘1’ for positive tobacco expenditure on health, education and housing but a rise in the spending and ‘0’ for no tobacco spending was constructed to share of food, alcohol and energy and electricity. make a comparative analysis between the expenditures of The crowding- out effects appear in Vietnam mainly on tobacco spending households and non- spending households. education. This result is similar to those in Turkey, India and The number of tobacco spending households in 2016 is 4100 Bangladesh.5 6 13 In terms of expenditure on food, comparing (corresponding to 44.86% of the sample).