BACKGROUND: This study investigates the crowding-out effect of tobacco expenditures on other household spending categories in North Macedonia, a country with one of the highest smoking prevalence rates in Europe. The research aims to quantify the economic trade-offs faced by households allocating significant portions of their income to tobacco products.
METHODS: Data from the Household Budget Survey (HBS) for the period 2018–2022 were analyzed using a Three-Stage Least Squares (3SLS) empirical approach. This methodology captures the interdependencies among various expenditure categories while addressing potential endogeneity issues. The analysis examines overall household spending patterns as well as differences across income groups.
RESULTS: The findings reveal that tobacco consumption significantly reduces household spending on essential goods and services such as clothing, health, and furniture, while simultaneously increasing spending on less productive items like alcohol and dining out. The impact varies by income group, with low-income households experiencing more pronounced effects on categories like health and clothing, whereas middle- and high-income households exhibit reductions in furniture and recreation spending.
CONCLUSIONS: The study highlights the adverse economic impact of tobacco consumption on household welfare in North Macedonia. Targeted policy interventions are recommended to mitigate these effects, including stricter enforcement of tobacco control measures, higher taxation on tobacco products, and increased access to smoking cessation programs. Public health campaigns should focus on raising awareness about the economic and social costs of tobacco use, particularly among low-income households and youth.