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Cash Incentives and Unhealthy Food Consumption

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  • Javier Rivas
  • Miguel Flores

Abstract

The costs associated with unhealthy food consumption are not only paid by those suffering from overweight but by all members of society in terms of higher costs for social security systems. With this in mind, we study the effectiveness of a tax, a subsidy and cash incentives in reducing unhealthy food consumption. Using an inter-temporal rational choice model with habit, we calibrate and simulate the effect of those policies to US and UK data. Our findings suggest that cash incentives may be the most effective policy in reducing unhealthy food consumption yet it can be the most costly one. Taxes are relatively ineffective in reducing unhealthy food consumption. Subsidies have the best balance between effectiveness and monetary benefits to the society.

Suggested Citation

  • Javier Rivas & Miguel Flores, 2011. "Cash Incentives and Unhealthy Food Consumption," Discussion Papers in Economics 11/47, Division of Economics, School of Business, University of Leicester, revised Jan 2012.
    • Handle: RePEc:lec:leecon:11/47
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    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp11-47.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Habit; Junk Food; Overweight; Public Policy; Rational Addiction;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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