The Impact of Tobacco Spending in Albania: Crowding Out Essentials and Crowding in Addictive Behaviors [Working Paper Series]

This Working Paper was written by Development Solutions Associates (DSA) in Albania. The working paper assesses the impact of tobacco spending on household budgets and estimates the crowding out effect of tobacco consumption in different income groups. Overall, households spend 2.7% of their budget on tobacco on average, although this varies slightly by income group, with low-, middle-, and high-income households spending 2.1%, 3.1%, and 2.5% on tobacco, respectively. The findings show that smoking households dedicate less of their budget to a variety of beneficial categories including health, education, housing, and clothes. This demonstrates the crowding out effect. On the other hand, tobacco spending is associated with an increase in spending on entertainment, alcohol, and food. Households in the middle-income group are most impacted by the crowding out effect, as they spend a larger share of their budget on tobacco relative to their counterparts. The working paper concludes with recommendations for policy makers to raise tobacco taxes to discourage tobacco use, thus improving households spending patterns. 

A Policy Brief based on this working paper can be found here.