The Crowding-Out Effect of Tobacco Consumption in Bosnia and Herzegovina (Policy Brief)

This Policy Brief was written by University of Banja Luka in Bosnia and Herzegovina. The policy brief analyzes the crowding-out effect of tobacco spending on other consumption. The researchers focus on this effect in low-, middle-, and high-income households using household budget survey (HBS) data for 2011, 2015, 2021, and 2022. The findings shows that tobacco-consuming households allocate a smaller share of their budget to food, housing, education, health, and other beneficial categories. At the same time, tobacco spending increases spending on less productive categories like alcohol, non-alcoholic beverages, and ready-made food. In low-income households, specifically, tobacco expenditure crowds out food, clothing, and goods, while crowding in spending on alcohol, non-alcoholic beverages, and restaurants and bars. These low-income households are especially vulnerable, as they dedicate more than 6% of their budget to tobacco, and may struggle to accumulate human capital or meet their basic needs due to tobacco consumption.The policy brief concludes with recommendations for policy makers to implement stronger fiscal and non-fiscal tobacco control measures to reduce the negative effects of tobacco use on households. 

A corresponding Working Paper can be found here.