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Accounting for Product Substitution in the Analysis of Food Taxes Targeting Obesity

  • Miao, Zhen
  • Beghin, John C.
  • Jensen, Helen H.

We extend the existing literature on food taxes targeting obesity. We systematically incorporatethe implicit substitution between added sugars and solid fats into a comprehensive food demandsystem and evaluate the effect of taxes on sugars and fats. The approach conditions how foodand obesity taxes affect total calorie intake. The proposed methodology accounts for the abilityof consumers to substitute leaner low-fat and low-sugar items for rich food items within the samefood group. This substitution is integrated into a calibrated demand system in addition to thesubstitution among food groups, using recent food intake data and existing demand elasticities.Simulations of taxes on added sugars and solid fat show that their impact on consumptionpatterns is understated and the induced welfare loss is overstated when abstracting from thesubstitution possibilities within food groups.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 32211.

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Date of creation: 28 Nov 2012
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Publication status: Published in Health Economics 2013, vol. 22 no. 11, pp. 1318-1343
Handle: RePEc:isu:genres:32211
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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  1. Richards, Timothy J. & Patterson, Paul M. & Tegene, Abebayehu, 2004. "Obesity and Nutrient Consumption: A Rational Addiction?," Working Papers 28539, Arizona State University, Morrison School of Agribusiness and Resource Management.
  2. Yaniv, Gideon & Rosin, Odelia & Tobol, Yossef, 2009. "Junk-food, home cooking, physical activity and obesity: The effect of the fat tax and the thin subsidy," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 823-830, June.
  3. Hayley H. Chouinard & David E. Davis & Jeffrey LaFrance & Jeffrey M. Perloff, 2008. "Milk Marketing Order Winners and Losers," Working Papers 2009-03, School of Economic Sciences, Washington State University.
  4. Shankar, Bhavani, 2009. "Fat Chance: Modelling the Socio-Economic Determinants of Dietary Fat Intake in China," 2009 Conference, August 16-22, 2009, Beijing, China 51538, International Association of Agricultural Economists.
  5. Jay Bhattacharya & M. Kate Bundorf, 2005. "The Incidence of the Healthcare Costs of Obesity," NBER Working Papers 11303, National Bureau of Economic Research, Inc.
  6. Beghin, John C. & Bureau, Jean-Christophe & Drogu?, Sophie, 2004. "Calibration of Incomplete Demand Systems in Quantitative Analysis, The," Staff General Research Papers 11771, Iowa State University, Department of Economics.
  7. Miao, Zhen & Beghin, John C. & Jensen, Helen H., 2010. "Taxing Sweets: Sweetener Input Tax or Final Consumption Tax?," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61511, Agricultural and Applied Economics Association.
  8. Schroeter, Christiane & Lusk, Jayson & Tyner, Wallace, 2008. "Determining the impact of food price and income changes on body weight," Journal of Health Economics, Elsevier, vol. 27(1), pages 45-68, January.
  9. Olivier Allais & Patrice Bertail & Véronique Nichèle, 2010. "The Effects of a Fat Tax on French Households' Purchases: A Nutritional Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 228-245.
  10. Albert J. Reed & J. William Levedahl & Charles Hallahan, 2005. "The Generalized Composite Commodity Theorem and Food Demand Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 28-37.
  11. Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
  12. Abdulai, Awudu & Aubert, Dominique, 2004. "Nonparametric and parametric analysis of calorie consumption in Tanzania," Food Policy, Elsevier, vol. 29(2), pages 113-129, April.
  13. John Beghin & Jean-Christophe Bureau & Sophie Drogue, 2004. "Calibration of incomplete demand systems in quantitative analysis," Applied Economics, Taylor & Francis Journals, vol. 36(8), pages 839-847.
  14. Cash, Sean B. & Sunding, David L. & Zilberman, David, 2004. "Fat Taxes And Thin Subsidies: Prices, Diet, And Health Outcomes," 2004 Annual meeting, August 1-4, Denver, CO 19961, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  15. Smith, Travis A. & Biing-Hwan, Lin & Lee, Jonq-Ying, 2010. "Taxing Caloric Sweetened Beverages: Potential Effects on Beverage Consumption, Calorie Intake, and Obesity," Economic Research Report 95465, United States Department of Agriculture, Economic Research Service.
  16. Smed, Sinne & Jensen, Jorgen D. & Denver, Sigrid, 2007. "Socio-economic characteristics and the effect of taxation as a health policy instrument," Food Policy, Elsevier, vol. 32(5-6), pages 624-639.
  17. Kuchler, Fred & Tegene, Abebayehu & Harris, James Michael, 2004. "Taxing Snack Foods: What to Expect for Diet and Tax Revenues," Agricultural Information Bulletins 33607, United States Department of Agriculture, Economic Research Service.
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