BACKGROUND: Smoking is related to direct medical costs and productivity losses, which may have a significant financial impact on households. Less known is the effect that smoking may have on labour market outcomes. As smoking may imply severe illnesses, intrahousehold caregiving may affect labour supply, especially in developing countries. In countries where caregiving is predominantly a female activity, the effect of smoking on caregiving can have substantial gender implications.
METHODS: The study simulates how rising tobacco prices affect female labour participation, incomes, and per capita household income (PCHI). Using a general equilibrium reduced-form model, the study quantifies the effects by household income quintiles using several data sources from Argentina (a country with relatively high smoking prevalence and low female labour participation).
RESULTS: The results reveal that a 25% increase in tobacco prices leads to a rise in the average female caregivers’ monthly labour income of up to 12.3%. This effect is produced by the rise in the number of hours worked by women caregivers and the higher number of women employed in the labour market, a substantial effect considering that the number of tobacco-related care recipients is reduced by 5.2%. The effects are non-linear across the income distribution, with women in the lowest quintile experiencing an increase of 14.7% in their labour incomes versus a rise of 9.8% for those in the upper quintile. The increase in the PCHI produced by this is of 0.53%.
CONCLUSIONS: The results provide new evidence on the socioeconomic effects of tobacco taxes, especially their consequences on female labour participation and household income. The study's methodology can be used to evaluate similar effects in other developing countries, leading to a deeper understanding of the full social benefits of tobacco taxation.