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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.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 11/47.

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Date of creation: Oct 2011
Date of revision: Jan 2012
Handle: RePEc:lec:leecon:11/47

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Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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Web page: http://www2.le.ac.uk/departments/economics
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Related research

Keywords: Habit; Junk Food; Overweight; Public Policy; Rational Addiction;

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  1. 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.
  2. Inas Rashad & Michael Grossman & Shin-Yi Chou, 2006. "The Super Size of America: An Economic Estimation of Body Mass Index and Obesity in Adults," Eastern Economic Journal, Eastern Economic Association, vol. 32(1), pages 133-148, Winter.
  3. 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.
  4. Gruber, Jonathan & Frakes, Michael, 2006. "Does falling smoking lead to rising obesity?," Journal of Health Economics, Elsevier, vol. 25(2), pages 183-197, March.
  5. 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.
  6. Jason Fletcher & David Frisvold & Nathan Tefft, 2009. "The Effects of Soft Drink Taxes on Child and Adolescent Consumption and Weight Outcomes," Emory Economics 0908, Department of Economics, Emory University (Atlanta).
  7. Levy, Amnon, 2002. "Rational eating: can it lead to overweightness or underweightness?," Journal of Health Economics, Elsevier, vol. 21(5), pages 887-899, September.
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