Financial burden of risky behaviours

Abstract

This paper examines the effect of alcohol and tobacco use on Ghanaian adults’ savings decisions. The dataset used for the study was obtained from the Ghana Socioeconomic Panel Survey. A recursive bivariate probit regression model was employed to address endogeneity between risky behaviours and savings decisions. The results revealed that participation in
drinking and/or smoking significantly reduces the probability of household savings. The Average Treatment Effect shows that individuals who engage in risky behaviors are 34.2% less likely to save than those who do not. For persons who exclusively engage in these behaviours, as indicated by the Average Treatment Effect on the Treated, their average savings decrease by 64.5%. The heterogeneous analysis further reveals that drinking had a more severe financial impact than smoking; drinking reduced the likelihood of saving by 33.2% compared to 25.2% for tobacco. These findings reveal that smoking and alcohol consumption do more than harm health by making households less likely to save. Public health and fiscal policies that target risky behaviours can deliver double dividends: improve overall health outcomes while concurrently strengthening household financial resilience.