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The Welfare Effects of Health-Based Food Tax Policy

  • 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)

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.

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Paper provided by Aboa Centre for Economics in its series Discussion Papers with number 81.

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Length: 39
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:tkk:dpaper:dp81
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