IDEAS home Printed from https://ideas.repec.org/p/hhs/umnees/0739.html
   My bibliography  Save this paper

Food Consumption, Paternalism and Economic Policy

Author

Listed:
  • Thunström, Linda

    () (Department of Economics, Umeå University)

Abstract

The thesis consists of a summary and four papers, concerned with food consumption, behavior associated with overconsumption of food and analysis of the economic policy reforms designed to improve health. Paper [I] estimates a hedonic price model on breakfast cereal, crisp bread and potato product data. The purpose is to examine the marginal implicit prices for food characteristics associated with health. A trade-off exists between health and taste. For instance, sugar, salt and fat are tasty but can be unhealthy if overconsumed; whereas fiber is unhealthy if underconsumed. If the marginal implicit price for sugar is negative, consumers value health over its taste. Our results are the marginal implicit price for sugar is negative for breakfast cereals and crisp bread—consumers value health over the taste of sugar. For salt, we find the opposite—a positive marginal implicit price, suggesting people value its taste over health. For fat, we find a negative marginal implicit price of fat in breakfast cereals and potato products containing salt, whereas we find a positive marginal implicit price of fat in hard bread and potato products that contain no salt. For the one healthy characteristic, fiber, we find a negative marginal implicit price in breakfast cereals and a positive implicit price in hard bread. Paper [II] uses a general equilibrium model to derive the optimal policy if people overconsume unhealthy food due to self-control problems. Individuals lacking self-control have a preference for immediate gratification, at the expense of future health. We show the optimal policy to help individuals with self-control problems to behave rationally is a combination of subsidies for the health capital stock and the physical capital stock. Paper [III] estimates a demand system for grain consumption based on household panel data and detailed product characteristics, and simulate the effect on grain consumption of economic policy reforms designed to encourage a healthier grain diet. Our results imply it is more cost-efficient to subsidize the fiber content than to subsidize products rich in fiber given the goal to increase the fiber intake of the average Swedish household. Our results also imply subsidies alone give rise to an increase in fiber, and to other unhealthy nutrients. Also, subsidies alone have negative effects on the budget. We therefore simulate the effect of policy reforms in which the subsidies are funded either by taxes on the content of unhealthy nutrients or by taxes on products that are overconsumed. Our results suggest that price instruments need to be substantial to change consumption. For instance, removing the VAT on products rich in fiber has little effect on consumption. Paper [IV] explores habit persistence in breakfast cereal purchases. To perform the analysis, we use a mixed multinomial logit model, on household panel data on breakfast cereal purchases. If habit persistence in consumption is strong, short and long-run responses to policy reforms will differ. Our results are breakfast cereal purchases are strongly associated with habit persistence. Our results also imply preferences for breakfast cereals are heterogeneous over households and the strength of habit persistence is similar over educational and income groups.

Suggested Citation

  • Thunström, Linda, 2008. "Food Consumption, Paternalism and Economic Policy," Umeå Economic Studies 739, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0739
    as

    Download full text from publisher

    File URL: http://www.econ.umu.se/DownloadAsset.action?contentId=47745&languageId=3&assetKey=ues739
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    2. Alessie, Rob & Kapteyn, Arie, 1991. "Habit Formation, Interdependent References and Demographic Effects in the Almost Ideal Demand System," Economic Journal, Royal Economic Society, vol. 101(406), pages 404-419, May.
    3. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November.
    4. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-342, March.
    5. Raquel Carrasco & José M. Labeaga & J. David López-Salido, 2005. "Consumption and Habits: Evidence from Panel Data," Economic Journal, Royal Economic Society, vol. 115(500), pages 144-165, January.
    6. Meghir, Costas & Weber, Guglielmo, 1996. "Intertemporal Nonseparability or Borrowing Restrictions? A Disaggregate Analysis Using a U.S. Consumption Panel," Econometrica, Econometric Society, vol. 64(5), pages 1151-1181, September.
    7. Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June.
    8. P. B. Seetharaman, 2004. "Modeling Multiple Sources of State Dependence in Random Utility Models: A Distributed Lag Approach," Marketing Science, INFORMS, vol. 23(2), pages 263-271, April.
    9. Tülin Erdem, 1996. "A Dynamic Analysis of Market Structure Based on Panel Data," Marketing Science, INFORMS, vol. 15(4), pages 359-378.
    10. Kenkel, Donald S. & Manning, Willard, 1999. "Economic evaluation of nutrition policy: Or, there's no such thing as a free lunch," Food Policy, Elsevier, vol. 24(2-3), pages 145-162, May.
    11. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
    12. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-763, Part I Ju.
    13. Benaissa Chidmi & Rigoberto A. Lopez, 2007. "Brand-Supermarket Demand for Breakfast Cereals and Retail Competition," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 324-337.
    14. Pradeep K. Chintagunta, 1993. "Investigating Purchase Incidence, Brand Choice and Purchase Quantity Decisions of Households," Marketing Science, INFORMS, vol. 12(2), pages 184-208.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Linda Thunström, 2010. "Preference Heterogeneity and Habit Persistence: The Case of Breakfast Cereal Consumption," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(1), pages 76-96, February.
    2. Useche, Pilar & Barham, Bradford & Foltz, Jeremy, 2006. "A Trait Specific Model of GM Crop Adoption by Minnesota and Wisconsin Corn Farmers," Working Papers 201525, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    3. Bonnet, Céline & Richards, Timothy J., 2016. "Models of Consumer Demand for Differentiated Products," TSE Working Papers 16-741, Toulouse School of Economics (TSE).
    4. Niemi, Janne, 2018. "Short-run and long-run food import elasticities with persistent trading habits," Working Papers 111, VATT Institute for Economic Research.
    5. Rob Alessie & Federica Teppa, 2010. "Saving and habit formation: evidence from Dutch panel data," Empirical Economics, Springer, vol. 38(2), pages 385-407, April.
    6. Emmerling, Johannes & Qari, Salmai, 2017. "Car ownership and hedonic adaptation," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 29-38.
    7. Yi, DongGyu, 2014. "Three studies on environmental valuation," ISU General Staff Papers 201401010800005065, Iowa State University, Department of Economics.
    8. Ortega, David L. & Wang, H. Holly & Wu, Laping & Hong, Soo Jeong, 2015. "Retail channel and consumer demand for food quality in China," China Economic Review, Elsevier, vol. 36(C), pages 359-366.
    9. Francisco Javier Amador & Rosa Marina González & Juan de Dios Ortúzar, 2004. "Preference heterogeneity and willingness to pay for travel time," Documentos de trabajo conjunto ULL-ULPGC 2004-12, Facultad de Ciencias Económicas de la ULPGC.
    10. Pereira, Pedro & Ribeiro, Tiago, 2011. "The impact on broadband access to the Internet of the dual ownership of telephone and cable networks," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 283-293, March.
    11. Richard G. Newell & Juha Siikamäki, 2014. "Nudging Energy Efficiency Behavior: The Role of Information Labels," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(4), pages 555-598.
    12. Sofia Berto Villas-Boas, 2007. "Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 625-652.
    13. Fosgerau, Mogens & Bierlaire, Michel, 2007. "A practical test for the choice of mixing distribution in discrete choice models," Transportation Research Part B: Methodological, Elsevier, vol. 41(7), pages 784-794, August.
    14. Paleti, Rajesh, 2018. "Generalized multinomial probit Model: Accommodating constrained random parameters," Transportation Research Part B: Methodological, Elsevier, vol. 118(C), pages 248-262.
    15. Gunnar Gutsche & Andreas Ziegler, 2016. "Are private investors willing to pay for sustainable investments? A stated choice experiment," MAGKS Papers on Economics 201640, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    16. Gonçalo Pacheco-de-Almeida & Ashton Hawk & Bernard Yeung, 2015. "The right speed and its value," Strategic Management Journal, Wiley Blackwell, vol. 36(2), pages 159-176, February.
    17. Frick, Bernd & Barros, Carlos Pestana & Prinz, Joachim, 2010. "Analysing head coach dismissals in the German "Bundesliga" with a mixed logit approach," European Journal of Operational Research, Elsevier, vol. 200(1), pages 151-159, January.
    18. Tülin Erdem & Susumu Imai & Michael Keane, 2003. "Brand and Quantity Choice Dynamics Under Price Uncertainty," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 5-64, March.
    19. Jaehwan Kim & Greg M. Allenby & Peter E. Rossi, 2002. "Modeling Consumer Demand for Variety," Marketing Science, INFORMS, vol. 21(3), pages 229-250, December.
    20. Marco A. Palma & Dmitry V. Vedenov & David Bessler, 2020. "The order of variables, simulation noise, and accuracy of mixed logit estimates," Empirical Economics, Springer, vol. 58(5), pages 2049-2083, May.

    More about this item

    Keywords

    food consumption; food characteristics; health; willingness-to-pay; habit persistence; preference heterogeneity; taxation; subsidies; quasi-hyperbolic discounting;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D10 - Microeconomics - - Household Behavior - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:umnees:0739. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Skog). General contact details of provider: http://edirc.repec.org/data/inumuse.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.