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The Welfare Effects of Health-Based Food Tax Policy

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  • Kaisa Kotakorpi

    (Department of Economics, Turku School of Economics, 20014 University of Turku, Tel: +358-2-3339339.)

  • Pirjo Pietinen

    (National Institute for Health and Welfare)

  • Jukka Pirttila

    (University of Tampere and CESifo)

  • Heli Reinivuo

    (National Institute for Health and Welfare)

  • Ilpo Suoniemi

    (Labour Institute for Economic Research)

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. Taxation of sugar leads to a statistically significant reduction in both the incidence of type 2 diabetes and 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 & Pirjo Pietinen & Jukka Pirttila & Heli Reinivuo & Ilpo Suoniemi, 2012. "The Welfare Effects of Health-Based Food Tax Policy," Discussion Papers 81, Aboa Centre for Economics.
  • Handle: RePEc:tkk:dpaper:dp81
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    2. Alberto Pench, 2020. "Time Allocation and Snacks and Sugar Sweetened Beverages Taxation," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(3), pages 469-492, November.
    3. Li, Wenying & Dorfman, Jeffrey H., 2019. "The implications of heterogeneous habit in consumer beverage purchases on soda and sin taxes," Food Policy, Elsevier, vol. 84(C), pages 111-120.
    4. Yifan Xie & Yingkai Fang & Dengjun Zhang, 2022. "How Environmental Performance Affects Financial Performance in the Food Industry: A Global Outlook," Sustainability, MDPI, vol. 14(4), pages 1-18, February.
    5. Irz, Xavier & Mazzocchi, Mario & Réquillart, Vincent & Soler, Louis-Georges, 2015. "Research in Food Economics: past trends and new challenges," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 96(01), pages 187-237, March.
    6. Li, Wenying & Dorfman, Jeffrey H., 2018. "Habit Formation with Smooth Transitions: Estimating Demand for U.S. Carbonated-Sweetened Beverages and Beer," 2018 Annual Meeting, August 5-7, Washington, D.C. 273852, Agricultural and Applied Economics Association.
    7. Caro, Juan Carlos & Ng, Shu Wen & Taillie, Lindsey Smith & Popkin, Barry M., 2017. "Designing a tax to discourage unhealthy food and beverage purchases: The case of Chile," Food Policy, Elsevier, vol. 71(C), pages 86-100.
    8. Lionel Cosnard, 2019. "Taxing Sugar and Sugary Products to Reduce Obesity: A CGE Assessment of Several Tax Policies," Post-Print hal-03148821, HAL.
    9. 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.
    10. Di Cosmo, Valeria & Tiezzi, Silvia, 2023. "Let them Eat Cake? The Net Consumer Welfare Impact of Sin Taxes," MPRA Paper 116214, University Library of Munich, Germany.
    11. Juan Carlos Caro & Pourya Valizadeh & Alejandrina Correa & Andres Silva & Shu Wen Ng, 2020. "Combined fiscal policies to promote healthier diets: Effects on purchases and consumer welfare," PLOS ONE, Public Library of Science, vol. 15(1), pages 1-23, January.
    12. Shameena Gill & Alia Maisara Adenan & Adli Ali & Noor Akmal Shareela Ismail, 2022. "Living through the COVID-19 Pandemic: Impact and Lessons on Dietary Behavior and Physical Well-Being," IJERPH, MDPI, vol. 19(2), pages 1-23, January.
    13. Alberto Pench, 0. "Time Allocation and Snacks and Sugar Sweetened Beverages Taxation," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 0, pages 1-24.

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    More about this item

    Keywords

    Sin taxes; food taxation; tax incidence; commodity demand; obesity; diabetes; coronary heart disease; bootstrapping;
    All these keywords.

    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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