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Tobacco-free Economy: A SAM-based Multiplier Model to Quantify the Impact of Changes in Tobacco Demand in Bangladesh

Author

Listed:
  • Muhammad Jami Husain

    (Muhammad Jami Husain is an economist at the Global Tobacco Control Branch, Office on Smoking and Health, Centers for Disease Control and Prevention, Atlanta, GA, USA, email: MHusain@cdc.gov)

  • Bazlul Haque Khondker

    (Bazlul Haque Khondker is Professor of Economics, University of Dhaka, Dhaka, Bangladesh, email: bazlul.khondker@gmail.com)

Abstract

In Bangladesh, where tobacco use is pervasive, reducing tobacco use is economically beneficial. This article uses the latest Bangladesh social accounting matrix (SAM) multiplier model to quantify the economy-wide impact of demand-driven changes in tobacco cultivation, bidi industries and cigarette industries. First, we compute various income multiplier values (i.e., backward linkages) for all production activities in the economy to quantify the impact of changes in demand for the corresponding products on gross output for 86 activities, demand for 86 commodities, returns to 4 factors of production and income for 8 household groups. Next, we rank tobacco production activities by income multiplier values relative to other sectors. Finally, we present three hypothetical ‘tobacco-free economy’ scenarios by diverting demand from tobacco products into other sectors of the economy and by quantifying the economy-wide impact. The simulation exercises with three different tobacco-free scenarios show that, compared to the baseline values, total sectoral output increases by 0.92, 1.3 and 0.75 per cent. The corresponding increases in the total factor returns (i.e., gross domestic product, GDP) are 1.57, 1.75 and 1.75 per cent. Similarly, total household income increases by 1.40, 1.58 and 1.55 per cent. JEL Classification: E1, C6, O2

Suggested Citation

  • Muhammad Jami Husain & Bazlul Haque Khondker, 2016. "Tobacco-free Economy: A SAM-based Multiplier Model to Quantify the Impact of Changes in Tobacco Demand in Bangladesh," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 10(1), pages 55-85, February.
    • Handle: RePEc:sae:mareco:v:10:y:2016:i:1:p:55-85
    DOI: 10.1177/0973801015612665
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    References listed on IDEAS

    as
    1. Sherman Robinson, 2006. "Macro Models and Multipliers: Leontief, Stone, Keynes, and CGE Models," Economic Studies in Inequality, Social Exclusion, and Well-Being, in: Alain Janvry & Ravi Kanbur (ed.), Poverty, Inequality and Development, chapter 0, pages 205-232, Springer.
    2. Pyatt, F Graham & Round, Jeffery I, 1979. "Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework," Economic Journal, Royal Economic Society, vol. 89(356), pages 850-873, December.
    3. Defourny, Jacques & Thorbecke, Erik, 1984. "Structural Path Analysis and Multiplier Decomposition within a Social Accounting Matrix Framework," Economic Journal, Royal Economic Society, vol. 94(373), pages 111-136, March.
    4. Ian J. Irvine & William A. Sims, 1997. "Tobacco Control Legislation and Resource Allocation Effects," Canadian Public Policy, University of Toronto Press, vol. 23(3), pages 259-273, September.
    5. Alain Janvry & Ravi Kanbur (ed.), 2006. "Poverty, Inequality and Development," Economic Studies in Inequality, Social Exclusion, and Well-Being, Springer, number 978-0-387-29748-4, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Social Accounting Matrix; Bangladesh SAM; Tobacco Consumption; Tobacco-free Economy; Multiplier Model; Multiplier Values; Input–Output Tables; Demand-driven Interventions;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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