Effects of cigarette price increase on fresh food expenditures of low-income South Korean households that spend relatively more on cigarettes

Abstract

On January 1, 2015, the cigarette tax in South Korea increased sharply. In this study, we analyzed how the fresh food expenditures of low-income smoking households that spend relatively more on cigarettes changed between 2014 and 2015 compared to their demographically comparable non-smoking counterparts. We conducted the analysis using a difference-in-differences analysis from which we derived expenditure differences between smoking households and non-smoking households and then examined whether the differences increased from 2014 to 2015. In deriving the differences, we utilized the nearest-matching method to ensure that, besides smoking status, the socio-demographics of the two groups were matched. We used data from the Household Income and Expenditure Survey of South Korea. The analysis showed that smoking households spent less on fruits and vegetables than non-smoking households and that this difference increased after the tax increase. The change was more remarkable in the poorest households that spent relatively more on cigarettes. This suggests that cigarette expenditures have a crowding out effect on fresh food expenditures for smoking households, with a significantly larger effect for households in the poorest group that spend more on cigarettes.