Crowding Out Effect of Tobacco Consumption in Serbia

This Report was written by the Institute of Economic Sciences (IES) in Serbia. The report discusses the impact of tobacco consumption on overall household spending in the country. In smoking households, the share of the budget dedicated to tobacco expenditures is increasing, from 5.8% in 2006 to 9.1% in 2017, despite a decreasing tobacco prevalence. The researchers find that spending on tobacco results in reduced spending on essential and productive consumption (food, clothing, education, and recreation and culture), especially in low-income households. High-income smoking households, on the other hand, have lower expenditures on health and durables than their non-smoking counterparts. Further, smoking households spend a larger share of their budgets on complementary non-productive consumption items. Based on these findings, the report makes policy recommendations to reduce the consumption of tobacco and, therefore, improve the financial standing of Serbian households. 

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