Unraveling the Effects of Economic Growth and Unemployment on Tobacco Use: A Panel Data Approach.

Abstract

Introduction: The economic situation is recognized as a significant factor influencing tobacco consumption. Accordingly, this research aims to investigate the relationship between economic growth, unemployment, and tobacco use.

Methods: This investigation employs data from 1985 to 2019 to elucidate the relationship between economic growth, unemployment, and tobacco consumption in a select group of OECD countries. Employing Pedroni and Johansen-Fisher Panel Co-Integration Tests, we assess the co-integrating relationships. Furthermore, FMOLS and DOLS techniques are applied, complemented by the Dumitrescu Hurlin Panel Causality Test.

Results: FMOLS and DOLS results suggest that a 1% increase in GDP leads to a 6.46% and 7.29% rise in tobacco consumption, respectively, while GDP squared results in a 0.39% and 0.43% decrease. However, both tests failed to establish a significant relationship between tobacco consumption and unemployment. Cointegration was confirmed by Johansen-Fisher and Pedroni tests. Dumitrescu-Hurlin causality tests revealed direction of granger causality from economic growth to tobacco consumption, but not with unemployment.

Conclusion: Tobacco consumption declined across all countries studied. Economic growth shows a positive association, while GDP squared has a negative association, indicating an inverted U-shaped relationship. No significant relationship was found with unemployment in the employed tests.

Implications: In addition to the measures implemented by countries to reduce tobacco consumption, economic factors also exert a significant relation with smoking behavior. The available results suggests that economic growth initially associated with increase in tobacco consumption but reduction in later stages indicating a long-term inverse relationship between economic growth and tobacco use.