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Smoking, Standard of Living, and
       Poverty in China
                      Teh-wei Hu
           University of California, Berkeley
                          and
                Public Health Institute

          To be presented at the 15th WCTOH
              Singapore March 24, 2012

      Funding: USNIH/Fogarty International Center
                 Grant (R01-TW05938)
                                                    1
Overview
I. Conceptual framework
II. Smoking expenditures among Chinese
     households
III. Impact of smoking on household
     expenditures and standard of living
IV. Impact of smoking on medical expenditures
     and poverty
V. Conclusions
                                                2
I. Conceptual Framework
•   Smoking reduces disposable income
•   Smoking reduces standard of living
•   Smoking leads to higher medical expenditures
•   Causes of poverty – human capital theory




                                                   3
Reduce
           Reduce       Expenditures on
          Disposable     Food, Housing,
           Income          Clothing,
                           Education



                                          Reduced Standard
                                              of Living
                                           Impoverishment
Smoking                                       Poverty




                          Increased
          Poor Health      Medical
            Status       Expenditures




                                                             4
Trade-off Between Smoking and
           Standard of Living
   Regression model:

(1) Expenditures per capita = f(age, family size,
    education, per capita income, urban,
    cigarette consumption)
(2) Expenditures per capita = f(age, family size,
    education, per capita income, urban,
    cigarette consumption)


                                                    5
Impact of Smoking on Standard of
                Living
• Standard of living =
  Total Expenditure (TE) – Cigarette Expenditure (CE)


• Smoking Status =
   # cigarette consumption/per day

    (TE – CE) /  cigarette consumption




                                                        6
II. Smoking Expenditures among
Rural/Urban Chinese Households




                                 7
China Tobacco Consumption Survey

Urban Sample:         2575 Households
                      Smokers: 1199
                      Non-smokers: 1376

Rural Sample:         829 Households
                      Smokers: 661
                      Non-smokers: 108

Hu, Mao, Liu (2005)

                                          8
Sample Distribution by Poverty Level

                      Urban (2,575)   Rural (829)

      Poverty             3-5%          17.6%

   Near Poverty           18.1           18.7

   Non-poverty            69.6           36.7


Hu, Mao, Liu (2006)

                                                    9
Comparison Between Smoking vs.
   Non-Smoking Rural Poverty
          Households
                     Smoking    Non-Smoking
Total Expenditures   359 Yuan    350 Yuan
      Food            51.0%        53%
     Housing           2.4          1.9
     Clothing          6.5          9.0
    Education          21.8        26.0
    Cigarette          8.4           -

                                              10
Comparison Between Smoking vs.
   Non-Smoking Urban Poverty
          Households
                     Smoking    Non-Smoking
Total Expenditures   605 Yuan    620 Yuan
      Food            59.9%       62.2%
     Housing           9.2          9.1
     Clothing          11.1        11.3
    Education          16.7        17.2
    Cigarette          6.7           -

                                              11
Urban Sample (smoker sample)
                        Poverty   Near Poverty   Non-Poverty

Daily Consumption
                         11.2        11.9           12.0
(# of cigarette)

Price per pack (Yuan)     3.8         4.7            8.2

Monthly Cigarette
                          29          46            126
Expenditures (Yuan)

Percent of Foreign
                         0.8%        4.6%           6.6%
Cigarettes

                                                           12
Rural Sample (smoker sample)
                        Poverty   Near Poverty   Non-Poverty

Daily Consumption
                         14.4        16.2           18.6
(# of cigarette)

Price per pack (Yuan)     1.1         1.2            1.7

Monthly Cigarette
                          24          29             49
Expenditures (Yuan)

Percent of Foreign
                          0            0            0.1%
Cigarettes

                                                           13
Trade-off Between Cigarette
Expenditures and Standard of Living

One additional Yuan per month will reduce…
• Total household expenditures
  (minus tobacco)                   0.52 Yuan
• Food expenditures per capita      0.05 Yuan
• Housing expenditures per capita   0.05 Yuan
• Clothing expenditures             0.02 Yuan


                                                14
Trade-off Between Cigarette
Consumption and Standard of Living


One pack per month will reduce…
• Total household expenditures
  (minus tobacco)                   2.4 Yuan
• Food expenditures per capita      0.5 Yuan
• Housing expenditures per capita   0.4 Yuan
• Clothing expenditures             0.2 Yuan


                                               15
IV. Excessive Medical Spending and
      Impoverishment (among lowest
              income quintile)
                             Rural Poverty Rate   Urban Poverty Rate
Prevailing Income                   29.6%                58.3%

Income excessive
(after medical spending)            32.2%               65.4%

Income poverty rate                 2.6%                7.1%

Projected Populations               6.3                 5.8
(millions)

Liu, Rao, Hu, et al (2006)                                         16
Spending on Cigarette and
                 Impoverishment
                        Rural Poverty Rate   Urban Poverty Rate
Prevailing Income              29.6%                58.3%

Income after
subtracting cigarette          37.1%               77.0%
spending

Difference                     7.5%                18.7%

Income poverty                 17.1                24.8
(million) population

                                                              17
V. Conclusions
Cigarette Expenditures:
• Have an immediate negative impact on living
  standards
• Can reduce the nutritional states through the
  replacement of expenditures on food
• Can lead to excessive medical expenditures
  and impoverishment


                                                  18

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S26 5 smoking, standard of living, and poverty in china- hu teh-wei

  • 1. Smoking, Standard of Living, and Poverty in China Teh-wei Hu University of California, Berkeley and Public Health Institute To be presented at the 15th WCTOH Singapore March 24, 2012 Funding: USNIH/Fogarty International Center Grant (R01-TW05938) 1
  • 2. Overview I. Conceptual framework II. Smoking expenditures among Chinese households III. Impact of smoking on household expenditures and standard of living IV. Impact of smoking on medical expenditures and poverty V. Conclusions 2
  • 3. I. Conceptual Framework • Smoking reduces disposable income • Smoking reduces standard of living • Smoking leads to higher medical expenditures • Causes of poverty – human capital theory 3
  • 4. Reduce Reduce Expenditures on Disposable Food, Housing, Income Clothing, Education Reduced Standard of Living Impoverishment Smoking Poverty Increased Poor Health Medical Status Expenditures 4
  • 5. Trade-off Between Smoking and Standard of Living Regression model: (1) Expenditures per capita = f(age, family size, education, per capita income, urban, cigarette consumption) (2) Expenditures per capita = f(age, family size, education, per capita income, urban, cigarette consumption) 5
  • 6. Impact of Smoking on Standard of Living • Standard of living = Total Expenditure (TE) – Cigarette Expenditure (CE) • Smoking Status = # cigarette consumption/per day  (TE – CE) /  cigarette consumption 6
  • 7. II. Smoking Expenditures among Rural/Urban Chinese Households 7
  • 8. China Tobacco Consumption Survey Urban Sample: 2575 Households Smokers: 1199 Non-smokers: 1376 Rural Sample: 829 Households Smokers: 661 Non-smokers: 108 Hu, Mao, Liu (2005) 8
  • 9. Sample Distribution by Poverty Level Urban (2,575) Rural (829) Poverty 3-5% 17.6% Near Poverty 18.1 18.7 Non-poverty 69.6 36.7 Hu, Mao, Liu (2006) 9
  • 10. Comparison Between Smoking vs. Non-Smoking Rural Poverty Households Smoking Non-Smoking Total Expenditures 359 Yuan 350 Yuan Food 51.0% 53% Housing 2.4 1.9 Clothing 6.5 9.0 Education 21.8 26.0 Cigarette 8.4 - 10
  • 11. Comparison Between Smoking vs. Non-Smoking Urban Poverty Households Smoking Non-Smoking Total Expenditures 605 Yuan 620 Yuan Food 59.9% 62.2% Housing 9.2 9.1 Clothing 11.1 11.3 Education 16.7 17.2 Cigarette 6.7 - 11
  • 12. Urban Sample (smoker sample) Poverty Near Poverty Non-Poverty Daily Consumption 11.2 11.9 12.0 (# of cigarette) Price per pack (Yuan) 3.8 4.7 8.2 Monthly Cigarette 29 46 126 Expenditures (Yuan) Percent of Foreign 0.8% 4.6% 6.6% Cigarettes 12
  • 13. Rural Sample (smoker sample) Poverty Near Poverty Non-Poverty Daily Consumption 14.4 16.2 18.6 (# of cigarette) Price per pack (Yuan) 1.1 1.2 1.7 Monthly Cigarette 24 29 49 Expenditures (Yuan) Percent of Foreign 0 0 0.1% Cigarettes 13
  • 14. Trade-off Between Cigarette Expenditures and Standard of Living One additional Yuan per month will reduce… • Total household expenditures (minus tobacco) 0.52 Yuan • Food expenditures per capita 0.05 Yuan • Housing expenditures per capita 0.05 Yuan • Clothing expenditures 0.02 Yuan 14
  • 15. Trade-off Between Cigarette Consumption and Standard of Living One pack per month will reduce… • Total household expenditures (minus tobacco) 2.4 Yuan • Food expenditures per capita 0.5 Yuan • Housing expenditures per capita 0.4 Yuan • Clothing expenditures 0.2 Yuan 15
  • 16. IV. Excessive Medical Spending and Impoverishment (among lowest income quintile) Rural Poverty Rate Urban Poverty Rate Prevailing Income 29.6% 58.3% Income excessive (after medical spending) 32.2% 65.4% Income poverty rate 2.6% 7.1% Projected Populations 6.3 5.8 (millions) Liu, Rao, Hu, et al (2006) 16
  • 17. Spending on Cigarette and Impoverishment Rural Poverty Rate Urban Poverty Rate Prevailing Income 29.6% 58.3% Income after subtracting cigarette 37.1% 77.0% spending Difference 7.5% 18.7% Income poverty 17.1 24.8 (million) population 17
  • 18. V. Conclusions Cigarette Expenditures: • Have an immediate negative impact on living standards • Can reduce the nutritional states through the replacement of expenditures on food • Can lead to excessive medical expenditures and impoverishment 18