Can Fiscal Policies Improve Eating Habits and Combat Obesity in Greece?

Introduction Greeks move away from the Mediterranean diet, adopting more unhealthy eating habits. At the same time, the prevalence of overweight and obesity is amongst the highest in Europe, for both adults and children. We study the implementation of fiscal policies for improving public health, estimating own- and cross-price elasticities for 13 food and beverages categories. Methods Own- and cross-price elasticities are estimated using the Deaton’s “Unit Value” model. The data used come from the 2019 Greek Household Budget Survey. Estimated elasticities are used to simulate effects of different fiscal policies on food consumption. The policies include a 20% tax on soft drinks and/or sweets, a subsidy on fruit and vegetables equivalent to a zero value added tax (VAT), and a combined tax-subsidy policy. Results About half of good categories have inelastic demand and only “alcoholic drinks” is a luxury good. As regards cross-price elasticities, about two thirds are relatively small (less than 0.2 in absolute terms). Estimates for the categories which are candidates for fiscal policy implementation show that low-income households are relatively more sensitive to price changes. Among the examined fiscal policies, the combined tax-subsidy policy has a great impact on demand for policy-related goods, as tax policy enhances the effect of the subsidy policy, and vice versa. Conclusions Results of this study are crucial as they describe the current food demand in Greece and, hence, constitute important guidance for fiscal policies related to diet.