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The Welfare Effects of Health-based Food Tax Policy

Author

Listed:
  • Kaisa Kotakorpi
  • Tommi Härkänen
  • Pirjo Pietinen
  • Heli Reinivuo
  • Ilpo Suoniemi
  • Jukka Pirttilä

Abstract

This paper examines the effects of health-oriented food tax reforms on the distribution of tax payments, food demand and health outcomes. Unlike earlier work, we also take into account the uncertainty related to both demand estimation and health estimates and report the confidence intervals for the overall health effects instead of only point estimates. A sugar tax of 1 € / kg reduces the incidence of type 2 diabetes on average by 13% and it also leads to a reduction in coronary heart disease. The health effects appear to be most pronounced for low-income individuals, and the reforms may therefore reduce health inequality. This effect undermines the traditional regressivity argument against the heavy taxation of unhealthy food.

Suggested Citation

  • Kaisa Kotakorpi & Tommi Härkänen & Pirjo Pietinen & Heli Reinivuo & Ilpo Suoniemi & Jukka Pirttilä, 2011. "The Welfare Effects of Health-based Food Tax Policy," CESifo Working Paper Series 3633, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3633
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    References listed on IDEAS

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    Cited by:

    1. Kishore, Avinash & Chakrabarti, Suman, 2015. "Is more inclusive more effective? The ‘New Style’ public distribution system in India," Food Policy, Elsevier, vol. 55(C), pages 117-130.
    2. repec:eee:jfpoli:v:71:y:2017:i:c:p:86-100 is not listed on IDEAS

    More about this item

    Keywords

    sin taxes; food taxation; tax incidence; commodity demand; obesity; diabetes; coronary heart disease; bootstrapping;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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