Tobacco Consumption Pattern in Different Economies: A Comparison Among High, Middle and Low Income Group Countries

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  Consumption of tobacco (particularly smoking) is a very common thing in our society. It has reached to monstrous proportion as more than a billion people consume it on a regular basis. The tobacco consumption in developing world and transitional
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    Naseem Ahamed, International Journal of Pharmaceutical Sciences and Business Management, Vol.2 Issue. 11, November- 2014, pg. 05-18 ISSN: 2310-6913  © 2014, IJPSBM All Rights Reserved, www.ijpsbm.com 5 Tobacco Consumption Pattern in Different Economies: A Comparison Among High, Middle and Low Income Group Countries Naseem Ahamed 1 1  IBS Hyderabad, naseemahamed@ibsindia.org bstract Consumption of tobacco (particularly smoking) is a very common thing in our society. It has reached to monstrous  proportion as more than a billion people consume it on a regular basis. The tobacco consumption in developing world and transitional economies, are much grave than in the developed world (according to WHO). The study tries to find, if there is discernable pattern of tobacco consumers and does the state of economy in which the person resides, has an impact on the market value of tobacco industry. The study, also only focuses on youth (up to the age of 35), for the reason that it is highly unlikely for a non tobacco consumer to become one after 35. People take up to smoking etc. during their teens and once that phase is over, the danger is largely subsided. This study is one of a kind in testing whether the overall economic condition of a country, is a fillip enough for the youth to take up tobacco. It analyses the high income group, middle income group and low income group of nations for the above mentioned purpose. The middle income group of countries (BRICSA) receives special attention because the  problem is most deeply rooted there. Therefore, the middle income group is tested for similitude among themselves apart from being compared income group wise. This study aims to attract the attention of the policy makers of all the income group countries in general and middle income group countries in particular, to implement effective measures in place to mitigate the problem. Keywords  :  Tobacco, BRICSA, GDP per capita, Hypothesis testing, Granger Causality 1. Introduction Consumption of tobacco is an age old traditional practice. It is taken in different forms (chewing, smoking etc.), and a large proportion of the world population consumes it. This large proportion of tobacco consumers in turn generates huge money for the tobacco companies. The tobacco industry worldwide is arguably, the largest industry of the world. According to the fourth edition of the “Tobacco Atlas”, in association with American Cancer Society and World Lung Foundation, the industry estimates a profit of 35 billion US Dollar. The tobacco industry is a behemoth. The data provided here speaks for itself. The size of the industry is such, that if it were a country, its GDP would be equal to the GDP of Poland, Saudi Arabia, Sweden and Venezuela combined together. According to the same source, tobacco is the cause of most preventable cancer disease, and is the cause for 6 million deaths annually. This is akin to an entire Denmark or Jordan dying annually. The prudence behind this study, is to find out whether inter alia,  GDP per capita (assumed as a proxy for the state of economy) has an impact on the market value of tobacco companies, in that economy and whether the  proportion of youth (up to 35 years old) consuming tobacco, in these different economies, differ in their consumption pattern. Does the state of economy (High income group/ Middle income group/ Low income group), or the GDP per capita of a nation has an influence on the consumption of tobacco by the denizens We closely inspect, developing countries (BRICSA), to find if there is any difference in the pattern of tobacco consumption among developing countries.    Naseem Ahamed, International Journal of Pharmaceutical Sciences and Business Management, Vol.2 Issue. 11, November- 2014, pg. 05-18 ISSN: 2310-6913  © 2014, IJPSBM All Rights Reserved, www.ijpsbm.com 6 The study is an attempt to uncover, the nexus between the state of economy (Developed/ Developing/ Underdeveloped) in which citizens live and their tobacco consumption pattern. This study tries to find out, whether there exists one such relationship between these two variables and is it significant, if the answer to the former question is affirmative. This study is being carried out, out of the sheer concern of the author for those who consume tobacco (in any form), and suffer as a result of it. They harm others too (passive smoking) in the process. This study could help  provide some insight into the relationship among the state of economy, age group of consumers and market value dominated by the tobacco companies. This study is carried out by a scholar based in Hyderabad (India) 2. Body of the article It is extremely unlikely to find previous literature on the same topic, but some earlier studies sharing some relevance to the topic at hand were reviewed. One of the papers to this effect is authored by Hana Ross and Frank J. Chaloupka, titled “The effect of cigarette prices on youth smoking”. This paper uses a very large sample of 17287 high school students, to study the impact of cigarette prices on teenagers smoking habit. The study apart from the general measures of price, also takes into account the perceived price of cigarettes by the  participants, to determine its effect on their smoking behaviour. The study concluded that price of cigarettes are a major driving force behind youth smoking habit, as they possess less disposable income that can be allotted towards cigarette. An increase in prices would deter, the youth from smoking more frequently. J.L. Zagorsky, in his research article titled, ”The wealth effects of smoking”, delineates the case of heavy smokers suffering financially, than the light or non smokers. This is also very intuitive, and sounds logical as the smokers have to shell out the money, out of their income and/or savings to accommodate for the extra cost of tobacco. However this study has assumed other demographic variables, to be constant. In their re search article titled, “Smoking in Scottish youths: personal income, parental social class and the cost of smoking”,  Patrick West, Helen Sweeting, and Robert Young conducted a longitudinal study on over 2500 students of Scotland and concluded that personal income as well as the social class of parents are major contributors towards youth taking up the habit of smoking. The personal income factor was found to be more significant in the youth belonging to higher social class. The analysis of the existing literature, pertinent to the topic leads us to conceptualize a vicious to and fro movement (let us denote it as the Class Run Concept), in which youth from lower social class, depends more on his personal income to resort to smoking 1 . As the personal income of the individual increases, he moves to the higher class and hence has more disposable income. Since, he has large income, prices would not deter his decision to consume more tobacco 2 .   Higher smoking apart from causing health issues, will also impact his financial well being 3  pushing him back to the lower class. The pictorial representation of this to and fro movement is provided in the exhibit 4 . 1.   Questions addressed through this study: 1)   Does consumption of tobacco gets influenced by the GDP per capita? 2)   Does the market value of tobacco industry gets uniformly affected by GDP per capita in all income group? First Hypothesis: There is no difference in the mean market value of tobacco industry across different income group regions. Second hypothesis: There is no difference in the variation of market value of tobacco industry across different income group regions 3)   Does GDP and market value influence the proportion of youth (upto 35 years old) tobacco consumers? (multiple regression model with proportion as dependent variable) 4)   Does the proportion of tobacco consumers of tobacco industry gets uniformly affected by GDP in all income group? First Hypothesis: There is no difference in the proportion of consumers of tobacco    Naseem Ahamed, International Journal of Pharmaceutical Sciences and Business Management, Vol.2 Issue. 11, November- 2014, pg. 05-18 ISSN: 2310-6913  © 2014, IJPSBM All Rights Reserved, www.ijpsbm.com 7 industry across different income group regions. Second hypothesis: There is no difference in the  proportion of consumers of tobacco across different income group regions 5)   Test the mean equality and variation equality of market value of BRICSA countries 6)   Does the proportion of tobacco consumers remain same across BRICSA countries? Table 1. Formulation of hypotheses corresponding to research questions: Questions addressed through this study Corresponding hypothesis formed to answer the questions Is there any pattern between market value of tobacco industry and GDP per capita. The correlation coefficient (rho) between market value of tobacco industry and GDP per capita is zero. Does the market value of tobacco industry gets uniformly affected by GDP per capita in all income group First Hypothesis: There is no difference in the mean market value of tobacco industry pairwise and across different income group regions. Second hypothesis: There is no difference in the variation of market value of tobacco industry pairwise and across different income group regions Does the proportion of tobacco consumers of tobacco industry gets uniformly affected by GDP in all income group First Hypothesis: There is no difference in the  proportion of consumers of tobacco industry pairwise and across different income group regions. Second hypothesis: There is no difference in the  proportion of consumers of tobacco across different income group regions Does GDP and market value influence the proportion of youth (up to 35 years old) tobacco consumers GDP and market value of tobacco industry have no impact on the proportion of youth smoking. Test the mean equality and variation equality of market value of BRICSA countries The mean of market value of tobacco industry is not significantly different across BRICSA countries. The variance of market value of tobacco industry is not significantly different across BRICSA countries. Does the proportion of tobacco consumers remain same across BRICSA countries? The proportion of tobacco consumers remain same across BRICSA countries? Is GDP per capita, the reason behind the increase in market value of tobacco industry. GDP per capita doe not Granger cause increase in Market value of tobacco industry 3.   Results For all the three income group economies: 1.1.   For the significance of correlation: In case of simple correlation coefficient: We use t-test and calculate the test statistic as under: with (n  –   2) degrees of freedom ryx being coefficient of simple correlation between x and y. This calculated value of t which in this case is 6.47, then compared with its table value which is approximately 2.19 and it can be observed that the calculated value is more than the table value, we could not accept the null hypothesis at the given level of significance and may infer that there is significant relationship of statistical significance between the two variables.    Naseem Ahamed, International Journal of Pharmaceutical Sciences and Business Management, Vol.2 Issue. 11, November- 2014, pg. 05-18 ISSN: 2310-6913  © 2014, IJPSBM All Rights Reserved, www.ijpsbm.com 8 For the equality of means Null Hypotheses Alternate Hypotheses µ 1 = µ 2   µ 1 is not equal to µ 2   µ 1 = µ 3   µ 1 is not equal to µ 3   µ 2 = µ 3   µ 2 is not equal to µ 3   The table value of F at 5 per cent level for degree of freedom 1 = 12 and degree of freedom 2= 12 is 2.6866. Since the calculated value of F is greater than the table value for all the income group taken pairwise, the F ratio is significant at 5 per cent level. Accordingly we reject our Null hypothesis (The variances of the samples are equal) and conclude that the difference is significant. Hence, the bottomline is that, all the samples have significantly different variation, and has been drawn from different population.  Null hypothesis could not be accepted.  Null Hypothesis: µ 1 = µ 2 = µ 3  Alternate Hypothesis: At least one of them is not equal The cumulative F value comes out to be 45, and hence the mean market values across different income group nations are significantly different from each other.  Null hypothesis could not be accepted. For the equality of variances Null Hypothesis: Alternate Hypothesis σ 1 = σ 2 σ 1 is not equal to σ 2 σ 2 = σ 3   σ 2 is not equal to σ 3   σ 1 = σ 3   σ 1 is not equal to σ 3   The table value of F at 5 per cent level for degree of freedom 1 = 12 and degree of freedom 2= 12 is 2.6866. Since the calculated value of F is greater than the table value for all the income group taken pairwise 5 , the F ratio is significant at 5 per cent level. Accordingly we reject our Null hypothesis (The variances of the samples are equal) and conclude that the difference is significant. Hence, the bottomline is that, all the samples have significantly different variation, and has been drawn from different population.  Null hypothesis could not be accepted. For the equality of proportion This hypotheses has been tested thrice on different combinations of income group countries. (like high middle, middle low, high low). Null Hypothesis: Alternate Hypotheses  p 1 = p 2  p 1  not equal to p 2  P 2  = p 3  P 2  not equal to p 3  P 3  = p 1  P 3  not equal to p 1  In order to test the significance of difference, we work out the test statistic as under:    Naseem Ahamed, International Journal of Pharmaceutical Sciences and Business Management, Vol.2 Issue. 11, November- 2014, pg. 05-18 ISSN: 2310-6913  © 2014, IJPSBM All Rights Reserved, www.ijpsbm.com 9 The Z values for the tobacco consuming population proportion up to 35 years of age for the combinations are given below: Z value between high and middle income economy is -1.08 Z value between middle and low income economy is -0.40 Z value between high and low income economy is -1.54 The critical value at 95% confidence level for a standard normal distribution is 1.96 As the test is two tailed i.e. it   is two-sided, we shall determine the rejection regions applying two-tailed test at 5% level which comes as under using normal curve area table: Since R    : | z | < 1.96 The mod of observed value of Z   is 1.08, 0.40 and 1.54, all of which is in the acceptance region and thus, the null hypothesis is accepted   and as such we conclude that the difference between the tobacco consuming  population proportion up to 35 years of age is insignificant across income group. Thus null hypothesis is accepted. For BRICSA (Brazil, Russia, India, China, South Africa) For the equality of means Null Hypothesis: Alternate Hypotheses µ 1 = µ 2 µ 1 is not equal to µ 2 µ 1 = µ 3  µ 1 is not equal to µ 3  µ 1 = µ 4  µ 1 is not equal to µ 4  µ 1 = µ 5  µ 1 is not equal to µ 5  µ 2 = µ 3  µ 2 is not equal to µ 3  µ 2 = µ 4  µ 2 is not equal to µ 4  µ 2 = µ 5  µ 2 is not equal to µ 5  µ 3 = µ 4  µ 3 is not equal to µ 4  µ 3 = µ 5  µ 3 is not equal to µ 5  µ 4 = µ 5  µ 4 is not equal to µ 5  Alternate Hypothesis: At least one of them is not equal The table value of F at 5 per cent level for degree of freedom 1 = 12 and degree of freedom 2= 12 is 2.6866. Since the calculated value of F, is greater than the table value for all the income group taken pairwise, the F ratio is significant at 5 per cent level. Accordingly we reject our Null hypothesis (The variances of the samples are equal) and conclude that the difference is significant. Hence, the bottomline is that, all the samples have significantly different mean, and has been drawn from different population.  Null hypothesis could not be accepted. The cumulative F value comes out to be 203.26, and hence the mean market values across different income group nations are significantly different from each other.  Null hypothesis could not be accepted. For the equality of variances Null Hypothesis Alternate Hypothesis σ 1 = σ 2 σ 1 is not equal to σ 2 σ 1 = σ 3   σ 1 is not equal to σ 3   σ 1 = σ 4 σ 1 is not equal to σ 4 σ 1 = σ 5   σ 1 is not equal to σ 5   σ 2 = σ 3   σ 2 is not equal to σ 3   σ 2 = σ 4 σ 2 is not equal to σ 4 σ 2 = σ 5   σ 2 is not equal to σ 5  
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