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Accounting For Product Substitution In The Analysis Of Food Taxes Targeting Obesity

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  • Zhen Miao
  • John C. Beghin
  • Helen H. Jensen

Abstract

We extend the existing literature on food taxes targeting obesity. We systematically incorporate the implicit substitution between added sugars and solid fats into a comprehensive food demand system and evaluate the effect of taxes on sugars and fats. The approach conditions how food and obesity taxes affect total calorie intake. The proposed methodology accounts for the ability of consumers to substitute leaner low‐fat and low‐sugar items for rich food items within the same food group. We calibrate this demand system approach using recent food intake data and existing estimates of price and income elasticities of demand. The demand system accounts for both the within‐food group substitution and the substitution across these groups. Simulations of taxes on added sugars and solid fat show that the tax impact on consumption patterns is understated and the induced welfare loss is overstated when not allowing for the substitution possibilities within food groups. Copyright © 2012 John Wiley & Sons, Ltd.

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  • Zhen Miao & John C. Beghin & Helen H. Jensen, 2013. "Accounting For Product Substitution In The Analysis Of Food Taxes Targeting Obesity," Health Economics, John Wiley & Sons, Ltd., vol. 22(11), pages 1318-1343, November.
    • Handle: RePEc:wly:hlthec:v:22:y:2013:i:11:p:1318-1343
    DOI: 10.1002/hec.2885
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    2. Anurag Sharma & Katharina Hauck & Bruce Hollingsworth & Luigi Siciliani, 2014. "The Effects Of Taxing Sugar‐Sweetened Beverages Across Different Income Groups," Health Economics, John Wiley & Sons, Ltd., vol. 23(9), pages 1159-1184, September.
    3. Alberto Gago & Xavier Labandeira & Xiral López Otero, 2014. "A Panorama on Energy Taxes and Green Tax Reforms," Hacienda Pública Española / Review of Public Economics, IEF, vol. 208(1), pages 145-190, March.
    4. Laura Cornelsen & Rosemary Green & Rachel Turner & Alan D. Dangour & Bhavani Shankar & Mario Mazzocchi & Richard D. Smith, 2015. "What Happens to Patterns of Food Consumption when Food Prices Change? Evidence from A Systematic Review and Meta‐Analysis of Food Price Elasticities Globally," Health Economics, John Wiley & Sons, Ltd., vol. 24(12), pages 1548-1559, December.
    5. Zarko Kalamov, 2020. "A sales tax is better at promoting healthy diets than the fat tax and the thin subsidy," Health Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 353-366, March.
    6. Fabrice Etilé, 2019. "The Economics of Diet and Obesity: Public Policy," PSE-Ecole d'économie de Paris (Postprint) hal-02154445, HAL.
    7. Juan Carlos Caro & Pourya Valizadeh & Alejandrina Correa & Andres Silva & Shu Wen Ng, 2020. "Combined fiscal policies to promote healthier diets: Effects on purchases and consumer welfare," PLOS ONE, Public Library of Science, vol. 15(1), pages 1-23, January.
    8. Bíró, Anikó, 2015. "Did the junk food tax make the Hungarians eat healthier?," Food Policy, Elsevier, vol. 54(C), pages 107-115.
    9. Mora, Toni & Llargués, Esteve & Recasens, Assumpta, 2015. "Does health education affect BMI? Evidence from a school-based randomised-control trial," Economics & Human Biology, Elsevier, vol. 17(C), pages 190-201.
    10. Jaya Jumrani & J. V. Meenakshi, 2023. "How effective is a fat subsidy? Evidence from edible oil consumption in India," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(2), pages 327-348, June.
    11. Nguyen, Ly & Wilson, Norbert L.W., 2017. "Healthy Foods: Tax or Voucher?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258491, Agricultural and Applied Economics Association.
    12. Wilson, Norbert L. W. & Zheng, Yuqing & Burney, Shaheer & Kaiser, Harry M., 2016. "Do Grocery Food Sales Taxes Cause Food Insecurity?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235324, Agricultural and Applied Economics Association.
    13. Lionel Cosnard, 2019. "Taxing Sugar and Sugary Products to Reduce Obesity: A CGE Assessment of Several Tax Policies," Post-Print hal-03148821, HAL.
    14. Cosnard, Lionel & Laborde, David, 2019. "Taxing Sugar and Sugary Products to Reduce Obesity: A CGE Assessment of Several Tax Policies," Conference papers 333067, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    15. Alasdair Gardiner, 2016. "Implications of a Sugar Tax in New Zealand: Incidence and Effectiveness," Treasury Working Paper Series 16/09, New Zealand Treasury.
    16. Paul Calcott & Vladimir Petkov, 2023. "Choosing between imperfect proxies for a corrective tax," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 245-275, April.
    17. Di Cosmo, Valeria & Tiezzi, Silvia, 2023. "Let them Eat Cake? The Net Consumer Welfare Impact of Sin Taxes," MPRA Paper 116214, University Library of Munich, Germany.
    18. Santeramo, Fabio Gaetano & Shabnam, Nadia, 2015. "The income-elasticity of calories, macro and micro nutrients: What is the literature telling us?," MPRA Paper 63754, University Library of Munich, Germany.

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    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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