IDEAS home Printed from https://ideas.repec.org/a/wly/hlthec/v29y2020i3p353-366.html
   My bibliography  Save this article

A sales tax is better at promoting healthy diets than the fat tax and the thin subsidy

Author

Listed:
  • Zarko Kalamov

Abstract

We analyze how a sales tax levied on all food products impacts the consumption of healthy food, unhealthy food, and obesity. The sales tax can stimulate the consumption of healthy meals by lowering the time costs of food preparation. Moreover, the sales tax lowers obesity under more general conditions than a tax on unhealthy food (fat tax) and a subsidy on healthy food (thin subsidy). We calibrate the model using recent consumption and time use data from the US. The thin subsidy is counterproductive and increases weight. While both the sales tax and the fat tax mitigate obesity, the former imposes a lower excess burden on consumers.

Suggested Citation

  • 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.
  • Handle: RePEc:wly:hlthec:v:29:y:2020:i:3:p:353-366
    DOI: 10.1002/hec.3987
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/hec.3987
    Download Restriction: no

    File URL: https://libkey.io/10.1002/hec.3987?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-1187, December.
    2. O'Donoghue, Ted & Rabin, Matthew, 2006. "Optimal sin taxes," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1825-1849, November.
    3. Helmuth Cremer & Philippe De Donder & Darío Maldonado & Pierre Pestieau, 2012. "Taxing Sin Goods and Subsidizing Health Care," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 101-123, March.
    4. Karabarbounis, Loukas, 2014. "Home production, labor wedges, and international business cycles," Journal of Monetary Economics, Elsevier, vol. 64(C), pages 68-84.
    5. Schroeter, Christiane & Lusk, Jayson & Tyner, Wallace, 2008. "Determining the impact of food price and income changes on body weight," Journal of Health Economics, Elsevier, vol. 27(1), pages 45-68, January.
    6. Harding, Matthew & Lovenheim, Michael, 2017. "The effect of prices on nutrition: Comparing the impact of product- and nutrient-specific taxes," Journal of Health Economics, Elsevier, vol. 53(C), pages 53-71.
    7. Haavio, Markus & Kotakorpi, Kaisa, 2011. "The political economy of sin taxes," European Economic Review, Elsevier, vol. 55(4), pages 575-594, May.
    8. Fletcher, Jason M. & Frisvold, David E. & Tefft, Nathan, 2010. "The effects of soft drink taxes on child and adolescent consumption and weight outcomes," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 967-974, December.
    9. Cawley, John, 2015. "An economy of scales: A selective review of obesity's economic causes, consequences, and solutions," Journal of Health Economics, Elsevier, vol. 43(C), pages 244-268.
    10. Chou, Shin-Yi & Grossman, Michael & Saffer, Henry, 2004. "An economic analysis of adult obesity: results from the Behavioral Risk Factor Surveillance System," Journal of Health Economics, Elsevier, vol. 23(3), pages 565-587, May.
    11. Tomas J. Philipson & Richard A. Posner, 1999. "The Long-Run Growth in Obesity as a Function of Technological Change," Working Papers 9912, Harris School of Public Policy Studies, University of Chicago.
    12. Dragone, Davide, 2009. "A rational eating model of binges, diets and obesity," Journal of Health Economics, Elsevier, vol. 28(4), pages 799-804, July.
    13. Levy, Amnon, 2002. "Rational eating: can it lead to overweightness or underweightness?," Journal of Health Economics, Elsevier, vol. 21(5), pages 887-899, September.
    14. Kevin D Hall & Juen Guo & Michael Dore & Carson C Chow, 2009. "The Progressive Increase of Food Waste in America and Its Environmental Impact," PLOS ONE, Public Library of Science, vol. 4(11), pages 1-6, November.
    15. Ted O'Donoghue & Matthew Rabin, 2003. "Studying Optimal Paternalism, Illustrated by a Model of Sin Taxes," American Economic Review, American Economic Association, vol. 93(2), pages 186-191, May.
    16. Tosun Mehmet S & Skidmore Mark L, 2007. "Cross-Border Shopping and the Sales Tax: An Examination of Food Purchases in West Virginia," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-20, December.
    17. Rupert, Peter & Rogerson, Richard & Wright, Randall, 1995. "Estimating Substitution Elasticities in Household Production Models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(1), pages 179-193, June.
    18. Chen Zhen & Eric A. Finkelstein & James M. Nonnemaker & Shawn A. Karns & Jessica E. Todd, 2014. "Predicting the Effects of Sugar-Sweetened Beverage Taxes on Food and Beverage Demand in a Large Demand System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(1), pages 1-25.
    19. Darius Lakdawalla & Tomas Philipson & Jay Bhattacharya, 2005. "Welfare-Enhancing Technological Change and the Growth of Obesity," American Economic Review, American Economic Association, vol. 95(2), pages 253-257, May.
    20. Yaniv, Gideon, 2002. "Non-adherence to a low-fat diet: an economic perspective," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 93-104, May.
    21. 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.
    22. Lin, Biing-Hwan & Frazao, Elizabeth & Guthrie, Joanne F., 1999. "Away-From-Home Foods Increasingly Important to Quality of American Diet," Agricultural Information Bulletins 33733, United States Department of Agriculture, Economic Research Service.
    23. Cawley, John & Meyerhoefer, Chad, 2012. "The medical care costs of obesity: An instrumental variables approach," Journal of Health Economics, Elsevier, vol. 31(1), pages 219-230.
    24. Chouinard Hayley H & Davis David E & LaFrance Jeffrey T & Perloff Jeffrey M, 2007. "Fat Taxes: Big Money for Small Change," Forum for Health Economics & Policy, De Gruyter, vol. 10(2), pages 1-30, June.
    25. McGrattan, Ellen R & Rogerson, Richard & Wright, Randall, 1997. "An Equilibrium Model of the Business Cycle with Household Production and Fiscal Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 267-290, May.
    26. Mark A. Aguiar & Erik Hurst & Loukas Karabarbounis, 2011. "Time Use During Recessions," NBER Working Papers 17259, National Bureau of Economic Research, Inc.
    27. John Cawley, 2004. "The Impact of Obesity on Wages," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    28. Jason M. Fletcher & David Frisvold & Nathan Tefft, 2010. "Can Soft Drink Taxes Reduce Population Weight?," Contemporary Economic Policy, Western Economic Association International, vol. 28(1), pages 23-35, January.
    29. Yaniv, Gideon & Rosin, Odelia & Tobol, Yossef, 2009. "Junk-food, home cooking, physical activity and obesity: The effect of the fat tax and the thin subsidy," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 823-830, June.
    30. David Bishai, 2015. "Generalized Nutrient Taxes Can Increase Consumer Welfare," Health Economics, John Wiley & Sons, Ltd., vol. 24(11), pages 1517-1522, November.
    31. Lin, Biing-Hwan & Frazao, Elizabeth, 1997. "Nutritional Quality of Foods At and Away From Home," Food Review/ National Food Review, United States Department of Agriculture, Economic Research Service, vol. 20(2), pages 1-8.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Justina Klimaviciute, 2024. "(No) time to be healthy: Optimal policy with time and monetary investments in health," Health Economics, John Wiley & Sons, Ltd., vol. 33(3), pages 410-431, March.
    2. Saha, Sanjib & Nordström, Jonas & Scarborough, Peter & Thunström, Linda & Gerdtham, Ulf-G., 2021. "In search of an appropriate mix of taxes and subsidies on nutrients and food: A modelling study of the effectiveness on health-related consumption and mortality," Social Science & Medicine, Elsevier, vol. 287(C).
    3. Alberto Pench, 0. "Time Allocation and Snacks and Sugar Sweetened Beverages Taxation," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 0, pages 1-24.
    4. Jianxiong Chen & Chung-Cheng Yang & Yu Lin, 2024. "Impacts of the National Nutrition Plan 2017–2030 on Listed Agrifood Enterprises: A Financial Statement Perspective," Agriculture, MDPI, vol. 14(5), pages 1-17, April.
    5. Zarko Y. Kalamov & Marco Runkel, 2022. "Taxation of unhealthy food consumption and the intensive versus extensive margin of obesity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(5), pages 1294-1320, October.
    6. Alberto Pench, 2020. "Time Allocation and Snacks and Sugar Sweetened Beverages Taxation," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(3), pages 469-492, November.
    7. S. Sajeesh & Ozgur M. Araz & Terry T.‐K. Huang, 2022. "Market positioning in food industry in response to public health policies," Production and Operations Management, Production and Operations Management Society, vol. 31(7), pages 2962-2981, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cawley, John, 2015. "An economy of scales: A selective review of obesity's economic causes, consequences, and solutions," Journal of Health Economics, Elsevier, vol. 43(C), pages 244-268.
    2. Mathieu-Bolh, Nathalie & Wendner, Ronald, 2020. "We are what we eat: Obesity, income, and social comparisons," European Economic Review, Elsevier, vol. 128(C).
    3. Cremer, Helmuth & Goulão, Catarina & Roeder, Kerstin, 2016. "Earmarking and the political support of fat taxes," Journal of Health Economics, Elsevier, vol. 50(C), pages 258-267.
    4. Davide Dragone & Francesco Manaresi & Luca Savorelli, 2016. "Obesity and Smoking: can we Kill Two Birds with one Tax?," Health Economics, John Wiley & Sons, Ltd., vol. 25(11), pages 1464-1482, November.
    5. Dragone, Davide & Savorelli, Luca, 2012. "Thinness and obesity: A model of food consumption, health concerns, and social pressure," Journal of Health Economics, Elsevier, vol. 31(1), pages 243-256.
    6. Dragone, D. & Ziebarth, N.R., 2015. "Non-Separable Time Preferences and Novelty Consumption: Theory and Evidence from the East German Transition to Capitalism," Health, Econometrics and Data Group (HEDG) Working Papers 15/28, HEDG, c/o Department of Economics, University of York.
    7. Fabrice Etilé, 2019. "The Economics of Diet and Obesity: Public Policy," PSE-Ecole d'économie de Paris (Postprint) hal-02154445, HAL.
    8. Dragone, Davide & Ziebarth, Nicolas R., 2017. "Non-separable time preferences, novelty consumption and body weight: Theory and evidence from the East German transition to capitalism," Journal of Health Economics, Elsevier, vol. 51(C), pages 41-65.
    9. Alberto Pench, 2020. "Time Allocation and Snacks and Sugar Sweetened Beverages Taxation," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(3), pages 469-492, November.
    10. Davide, Dragone & Francesco, Manaresi & Luca, Savorelli, 2013. "Obesity and smoking: can we catch two birds with one tax?," SIRE Discussion Papers 2013-31, Scottish Institute for Research in Economics (SIRE).
    11. Yaniv, Gideon & Rosin, Odelia & Tobol, Yossef, 2009. "Junk-food, home cooking, physical activity and obesity: The effect of the fat tax and the thin subsidy," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 823-830, June.
    12. Bolh, Nathalie & Wendner, Ronald, 2021. "Conspicuous leisure, time allocation, and obesity Kuznets curves," MPRA Paper 108644, University Library of Munich, Germany.
    13. Zarko Y. Kalamov & Marco Runkel, 2022. "Taxation of unhealthy food consumption and the intensive versus extensive margin of obesity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(5), pages 1294-1320, October.
    14. Georgia S. Papoutsi & Andreas C. Drichoutis & Rodolfo M. Nayga Jr., 2013. "The Causes Of Childhood Obesity: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 27(4), pages 743-767, September.
    15. Nathalie Mathieu-Bolh, 2021. "Economic Stress and Body Weight During the COVID-19 Pandemic," Studies in Microeconomics, , vol. 9(2), pages 256-282, December.
    16. Alberto Pench, 0. "Time Allocation and Snacks and Sugar Sweetened Beverages Taxation," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 0, pages 1-24.
    17. Chu-chuan Cheng & Hsun Chu, 2018. "Optimal policies for sin goods and health care: Tax or subsidy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(2), pages 412-429, April.
    18. Gračner, Tadeja, 2021. "Bittersweet: How prices of sugar-rich foods contribute to the diet-related disease epidemic in Mexico," Journal of Health Economics, Elsevier, vol. 80(C).
    19. Ou Yang & Peter Sivey & Andrea M. de Silva & Anthony Scott, 2020. "Parents' Demand for Sugar Sweetened Beverages for Their Pre‐School Children: Evidence from a Stated‐Preference Experiment," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 480-504, March.
    20. Barone, Adriana & O'Higgins, Niall, 2010. "Fat and out in Salerno and its province: Adolescent obesity and early school leaving in Southern Italy," Economics & Human Biology, Elsevier, vol. 8(1), pages 44-57, March.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:hlthec:v:29:y:2020:i:3:p:353-366. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/5749 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.