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Junk-food, home cooking, physical activity and obesity: The effect of the fat tax and the thin subsidy

  • Yaniv, Gideon
  • Rosin, Odelia
  • Tobol, Yossef

In an effort to reduce the growing prevalence of obesity, a tax on junk-foods, known as 'fat tax', has been proposed, the revenue from which could be used to finance a 'thin subsidy' for healthy foods or exercising equipment. The present paper addresses the fat tax and thin subsidy within a food-intake rational-choice model. Assuming that healthy meals are cooked at home with purchased ingredients and time input, the paper examines the effects on obesity of a tax on junk-food meals and a subsidy to cooking ingredients, distinguishing between a weight-conscious and a non-weight conscious individual, and between a weight-conscious individual who is physically active and physically inactive. The results show that for a non-weight conscious individual a fat tax will unambiguously reduce obesity, whereas a thin subsidy may increase obesity. However, for a weight-conscious individual, particularly one who is physically active, even a fat tax may increase obesity, as it may reduce not just the consumption of junk-food, but also the time devoted to physical activity. The paper explores conditions under which obesity will rise, fall, or remain intact following the introduction of a fat tax or a thin subsidy.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 5-6 (June)
Pages: 823-830

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:5-6:p:823-830
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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