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The Effects of a Fat Tax on Dairy Products

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  • Chouinard, Hayley H
  • Davis, David E.
  • LaFrance, Jeffrey T.
  • Perloff, Jeffrey M

Abstract

We apply an incomplete demand system to supermarket scanner data to estimate the effects of a fat tax on dairy products for different demographic groups. We find own-price elasticities of demand are relatively inelastic and vary little across groups. A fat tax may be an effective means to raise revenue, but will not result in a significant reduction in fat consumption. The welfare effects associated with a fat tax are large and vary greatly across demographic groups. These fat taxes are regressive in nature, as the elderly and poor suffer greater welfare losses.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt60t1f3tn.

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Date of creation: 01 Aug 2005
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Handle: RePEc:cdl:agrebk:qt60t1f3tn

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Related research

Keywords: fat tax; incomplete demand system; Life Sciences;

References

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  1. Huang, Kuo S. & Lin, Biing-Hwan, 2000. "Estimation Of Food Demand And Nutrient Elasticities From Household Survey Data," Technical Bulletins 33579, United States Department of Agriculture, Economic Research Service.
  2. David M. Cutler & Edward L. Glaeser & Jesse M. Shapiro, 2003. "Why Have Americans Become More Obese?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 93-118, Summer.
  3. LaFrance, Jeffrey T., 2004. "Integrability of the linear approximate almost ideal demand system," Economics Letters, Elsevier, vol. 84(3), pages 297-303, September.
  4. Jeffrey T. LaFrance & W. Michael Hanemann, 1989. "The Dual Structure of Incomplete Demand Systems," Development Research Unit Working Paper Series archive-21, Monash University, Department of Economics.
  5. Kuchler, Fred & Golan, Elise H. & Variyam, Jayachandran N. & Crutchfield, Stephen R., 2005. "Obesity Policy and the Law of Unintended Consequences," Amber Waves, United States Department of Agriculture, Economic Research Service, June.
  6. Shin-Yi Chou & Michael Grossman & Henry Saffer, 2002. "An Economic Analysis of Adult Obesity: Results from the Behavioral Risk Factor Surveillance System," NBER Working Papers 9247, National Bureau of Economic Research, Inc.
  7. Bergtold, Jason S. & Akobundu, Eberechukwu & Peterson, Everett B., 2004. "The FAST Method: Estimating Unconditional Demand Elasticities for Processed Foods in the Presence of Fixed Effects," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(02), August.
  8. Ted O'Donoghue & Matthew Rabin, 2005. "Optimal Sin Taxes," Levine's Bibliography 784828000000000346, UCLA Department of Economics.
  9. Jeffrey T. LaFrance, 1990. "Incomplete Demand Systems And Semilogarithmic Demand Models," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 34(2), pages 118-131, 08.
  10. Fred Kuchler & Abebayehu Tegene & J. Michael Harris, 2005. "Taxing Snack Foods: Manipulating Diet Quality or Financing Information Programs?," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(1), pages 4-20.
  11. Kuchler, Fred & Golan, Elise H. & Variyam, Jayachandran N. & Crutchfield, Stephen R., 2005. "Obesity Policy and the Law of Unintended Consequences," Brazilian Journal of Rural Economy and Sociology (RESR), Sociedade Brasileira de Economia e Sociologia Rural, June.
  12. LaFrance, Jeffrey T., 1985. "Linear demand functions in theory and practice," Journal of Economic Theory, Elsevier, vol. 37(1), pages 147-166, October.
  13. Christopher J. Ruhm, 1996. "Are Recessions Good For Your Health?," NBER Working Papers 5570, National Bureau of Economic Research, Inc.
  14. Heien, Dale & Wessells, Cathy Roheim, 1990. "Demand Systems Estimation with Microdata: A Censored Regression Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 365-71, July.
  15. John L. Park & Rodney B. Holcomb & Kellie Curry Raper & Oral Capps, 1996. "A Demand Systems Analysis of Food Commodities by U.S. Households Segmented by Income," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 290-300.
  16. Shapiro, Jesse & Glaeser, Edward & Cutler, David, 2003. "Why Have Americans Become More Obese," Scholarly Articles 2640583, Harvard University Department of Economics.
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Citations

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Cited by:
  1. Allais, Olivier & Bertail, Patrice & Nichele, Veronique, 2008. "The Effects of a "Fat Tax" on the Nutrient Intake of French Households," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43967, European Association of Agricultural Economists.
  2. Nordstrom, Jonas & Thunstrom, Linda, 2007. "Effects of Economic Policies Aimed at Encouraging a Healthier Grain Consumption," 2007 1st Forum, February 15-17, 2007, Innsbruck, Austria 6611, International European Forum on Innovation and System Dynamics in Food Networks.
  3. Yoon, Jangho & Brown, Timothy T., 2011. "Does the promotion of community social capital reduce obesity risk?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(3), pages 296-305, May.
  4. Rahkovsky, Ilya & Gregory, Christian A., 2011. "Food Prices and Blood Cholesterol," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103566, Agricultural and Applied Economics Association.
  5. Leffler, Kristyn K. & Carpio, Carlos E. & Boonsaeng, Tullaya, 2012. "Temporal Aggregation and Treatment of Zero Dependent Variables in the Estimation of Food Demand using Cross-Sectional Data," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124913, Agricultural and Applied Economics Association.

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