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Equilibrium Effects of Food Labeling Policies

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  • Nano Barahona
  • Cristóbal Otero
  • Sebastián Otero

Abstract

We study a regulation in Chile that mandates warning labels on products whose sugar or caloric concentration exceeds certain thresholds. We show that consumers substitute from labeled to unlabeled products—a pattern mostly driven by products that consumers mistakenly believe to be healthy. On the supply side, we find substantial reformulation of products and bunching at the thresholds. We develop and estimate an equilibrium model of demand for food and firms' pricing and nutritional choices. We find that food labels increase consumer welfare by 1.8% of total expenditure, and that these effects are enhanced by firms' responses. We then use the model to study alternative policy designs. Under optimal policy thresholds, food labels and sugar taxes generate similar gains in consumer welfare, but food labels benefit the poor relatively more.

Suggested Citation

  • Nano Barahona & Cristóbal Otero & Sebastián Otero, 2023. "Equilibrium Effects of Food Labeling Policies," Econometrica, Econometric Society, vol. 91(3), pages 839-868, May.
    • Handle: RePEc:wly:emetrp:v:91:y:2023:i:3:p:839-868
    DOI: 10.3982/ECTA19603
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    2. Marine Spiteri & Ghislaine Narayanane & Vincent Réquillart & Louis‐Georges Soler, 2024. "Reformulation of processed foods: Mixed effects on salt and saturated fatty acids intake in France," Agribusiness, John Wiley & Sons, Ltd., vol. 40(3), pages 596-613, July.
    3. Walker Estefania, 2023. "Impacto del etiquetado frontal de alimentos sobre el consumo," Asociación Argentina de Economía Política: Working Papers 4699, Asociación Argentina de Economía Política.
    4. Liu, Yizao & Fan, Linlin & Zhang, Yuxiang, 2024. "Evaluating The Impact of Nutritional Label Serving Size Change," 2024 Annual Meeting, July 28-30, New Orleans, LA 343726, Agricultural and Applied Economics Association.
    5. Bauner, Christoph & Lavoie, Nathalie, 2024. "Are "Clean" Foods "Healthy"?," 2024 Annual Meeting, July 28-30, New Orleans, LA 343779, Agricultural and Applied Economics Association.
    6. Cengiz, Ezgi & Rojas, Christian, 2024. "What drives the reduction in sodium intake? Evidence from scanner data," Food Policy, Elsevier, vol. 122(C).
    7. A. Ramirez-Hassan & C. Gomez & S. Velasquez & K. Tangarife, 2023. "Marijuana on Main Streets? The Story Continues in Colombia: An Endogenous Three-part Model," Papers 2306.10031, arXiv.org.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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