Working Paper: NBER ID: w19781
Authors: Matthew Harding; Michael Lovenheim
Abstract: This paper provides an analysis of the role of prices in determining food purchases and nutrition using very detailed transaction-level observations for a large, nationally-representative sample of US consumers over the period 2002-2007. Using product- specific nutritional information, we develop a new method of partitioning the product space into relevant nutritional clusters that define a set of nutritionally-bundled goods, which parsimoniously characterize consumer choice sets. We then estimate a large utility-derived demand system over this joint product-nutrient space that allows us to calculate price and expenditure elasticities. Using our structural demand estimates, we simulate the role of product taxes on soda, sugar-sweetened beverages, packaged meals, and snacks, and nutrient taxes on fat, salt, and sugar. We find that a 20% nutrient tax has a significantly larger impact on nutrition than an equivalent product tax, due to the fact that these are broader-based taxes. However, the costs of these taxes in terms of consumer utility are not higher. A sugar tax in particular is a powerful tool to induce healthier nutritive bundles among consumers.
Keywords: nutrition; taxes; consumer behavior; obesity; public health
JEL Codes: C33; H2; I12; I19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 20% nutrient tax (H29) | nutrition impact (I12) |
| sugar tax (H20) | total purchased calories (D18) |
| sugar tax (H20) | sugar consumption (L66) |
| soda tax (H71) | total calories (Y10) |
| soda tax (H71) | sugar consumption (L66) |
| taxes on snacks and packaged meals (H25) | nutrition (I15) |
| fat tax (H22) | calories (Y60) |
| salt tax (H26) | calories (Y60) |
| nutrient-specific taxes (H23) | unhealthy food purchases (D18) |