The tobacco industry plays a large role in the economies of many countries around the world, providing jobs in the agricultural and manufacturing sectors. It additionally provides governments with large amounts of revenues in the form of cigarette taxes. However, tobacco places a significant public health burden around the world, contributing to nearly millions of illnesses a year and billions in economic losses. This places policymakers in a cost-benefit scenario; while imposing stricter tobacco legislation would reduce tobacco consumption and improve public health in the country, further regulating the industry could reduce tax revenue and lead to layoffs. The question ultimately becomes whether the benefits of tobacco control outweigh the potential economic costs.
Motivated by this policy question, my research presented at the National Conference on Undergraduate Research in April 2022 examined the health costs of tobacco for Indonesian children. Indonesia has one of the highest smoking rates in the world, at 62.9% among men and 4.8% among women. While the negative effects of prenatal tobacco exposure and secondhand smoke have been well established, increasing evidence suggests that children living in tobacco consuming households experience higher levels of food insecurity and malnutrition. Following this literature, I examined whether Indonesian children living in tobacco consuming households face an increased risk of stunting, a condition caused by chronic malnutrition and marked by a permanent reduction in height. Using a sample of children from the Indonesian Family Life Survey, I not only found that living in a tobacco consuming household is associated with an increased risk of stunting, but also that this risk increases at higher levels of tobacco expenditure. Given that stunting has been linked to reduced health, educational attainment, and lifetime earnings over a child’s life cycle, this suggests that the health costs of tobacco likely outweigh industry benefits.
What should be the next step for Indonesian policy makers? Stronger tobacco control in the form of higher excise taxes is generally the first thing that comes to mind. However, tax increases could have negative implications for child health. If taxes fail to reduce tobacco consumption, increased prices will only raise tobacco expenditures, which my findings suggest would increase the incidence of stunting for children living in affected households. Considering that tobacco is an addictive good, this scenario is not implausible, as consumers will likely be relatively unresponsive to changes in price. Still, evidence suggests that poor households are sensitive to tobacco price changes, so taxation may succeed in lowering the tobacco consumption of poor households, whose children face the highest risk of stunting.
While the effects of taxation on expenditure are somewhat unclear, taxation is not the only form of tobacco control. The WHO Framework Convention on Tobacco Control (FCTC) recommends public smoking bans, advertising restrictions, and smoking cessation assistance in addition to taxation. These policies are likely to positively impact child health; if they succeed in curbing smoking habits, the resulting negative effect on tobacco expenditure would produce positive outcomes for child nutrition. However, several questions surrounding the impacts of tobacco control remain. For instance, would these more indirect policies succeed in reducing smoking, and would their success outweigh the expense of their execution? Is there a level of taxation that would produce a binding effect on tobacco consumption, despite the good’s addictive nature? Further answering these questions will be the task of future economic and policy research but are pressing questions to answer in the case of Indonesia.
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