Tobacco control policies—such as increasing cigarette excise taxes—are often opposed by tobacco companies and their allies. In tobacco-growing countries, these entities argue that tobacco farming provides viable economic livelihoods and tobacco control policies would negatively affect the livelihoods of tobacco farming households. However, the argument that tobacco farming provides a viable economic livelihood is not supported by rigorous empirical evidence. A new Executive Summary of a major research report (ringkasan dalam Bahasa Indonesia) and a recent article in Tobacco Control from University of Gadjah Mada, the American Cancer Society and the Australian National University analyzes the effects of tobacco farming on farmers’ household income using a rich panel dataset obtained from a two-wave survey of current and former tobacco farming households in Indonesia between 2016 and 2017. The panel dataset allows for systematic calculations of farming households’ income and household labor costs across time periods. Combined with rainfall data, these data permit the accurate estimation of the effect of tobacco farming on income.

 

Like most non-irrigated crops, tobacco yields range widely in most countries. For example, in Indonesia, both tobacco and former tobacco farming households generally did significantly better in 2017 than in 2016: profits were significantly higher in 2017 from all crops, including tobacco. The main explanation for the better outcomes was the favorable amount of rainfall during the tobacco farming season in 2017 (in Indonesia, it’s typically a case of there be less rain in the “dry” season). Despite the better outcomes, tobacco farming households were not doing economically better than households that had stopped growing tobacco. Regression analyses show that a one percentage point increase in the share of land for tobacco farming reduces income by USD $333 per hectare. For a median tobacco farming household with 0.25 hectare of land, a percentage point increase in the share of land for tobacco farming would reduce income by USD $83.25. The research also generates significant evidence that switching away from tobacco farming typically resulted in significantly higher incomes for these households. Tobacco farming households are generating lower income because they spent more on both non-labor and labor farming inputs. 

 

The findings in the study suggest that relying exclusively or largely on tobacco farming was not an optimal economic decision for farmers. Crop (other than tobacco) farming generated higher household income and incurred lower household labor costs than tobacco farming. Moreover, decreasing the share of tobacco crops in a household’s crop portfolio was likely to lead to higher income.  Overall, the findings suggest that growing non-tobacco crops is a viable alternative livelihood for tobacco farming in Indonesia.

 

Also see recent research on why farmers choose to grow tobacco here.

 

Authors: Gumilang Aryo Sahadewo (Faculty of Economics and Business, Universitas Gadjah Mada), Jeffrey Drope, Qing Li, Nigar Nargis (Economic and Health Policy Research, American Cancer Society), Firman Witoelar (Crawford School of Public Policy, Australian National University)