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The welfare effects of health-based food tax policy

Author

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  • Härkänen, Tommi
  • Kotakorpi, Kaisa
  • Pietinen, Pirjo
  • Pirttilä, Jukka
  • Reinivuo, Heli
  • Suoniemi, Ilpo

Abstract

This paper examines the effects of health-oriented food tax reforms on the distribution of tax payments, food demand and health outcomes. We offer an illustration of how one can take into account the uncertainty related to both demand estimation and health estimates and to produce confidence intervals for the overall health effects instead of only point estimates. Taxation of sugar could lead to a statistically significant reduction in both the incidence of type 2 diabetes and coronary heart disease. The health effects appear to be most pronounced for low-income individuals, and the reforms may therefore reduce health inequality. This effect undermines the traditional regressivity argument against the heavy taxation of unhealthy food.

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  • Härkänen, Tommi & Kotakorpi, Kaisa & Pietinen, Pirjo & Pirttilä, Jukka & Reinivuo, Heli & Suoniemi, Ilpo, 2014. "The welfare effects of health-based food tax policy," Food Policy, Elsevier, vol. 49(P1), pages 196-206.
    • Handle: RePEc:eee:jfpoli:v:49:y:2014:i:p1:p:196-206
    DOI: 10.1016/j.foodpol.2014.07.001
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    More about this item

    Keywords

    Sin taxes; Food taxation; Tax incidence; Commodity demand; Obesity; Diabetes; Coronary heart disease; Bootstrapping;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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