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

Iowa State University Center for Agriculture and Rural Development Working Paper No. 10-WP518

57 Pages Posted: 16 Dec 2010 Last revised: 8 Jun 2013

See all articles by Zhen Miao

Zhen Miao

Iowa State University - Center for Agriculture and Rural Development (CARD)

John Beghin

University of Nebraska Lincoln Agricultural Economics; Iowa State University - Department of Economics

Helen H. Jensen

Iowa State University - Department of Economics

Date Written: october 15, 2011

Abstract

We extend the existing literature on food taxes targeting obesity. We systematically incorporate the implicit substitution between added sugars and solid fats into a comprehensive food demand system and evaluate the effect of taxes on sugars and fats. The approach conditions how food and obesity taxes affect total calorie intake. The proposed methodology accounts for the ability of consumers to substitute leaner low-fat and low-sugar items for rich food items within the same food group. This substitution is integrated into a calibrated demand system in addition to the substitution 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 consumption patterns is understated and the induced welfare loss is overstated when abstracting from the substitution possibilities within food groups.

Keywords: Discretionary Calories, Fat, Food Demand, Health Policy Nutrition, Low-Fat, Low-Sugar Substitutes, Obesity, Sugar, Sweeteners, Tax

JEL Classification: I18, Q18

Suggested Citation

Miao, Zhen and Beghin, John and Jensen, Helen H., Accounting for Product Substitution in the Analysis of Food Taxes Targeting Obesity (october 15, 2011). Iowa State University Center for Agriculture and Rural Development Working Paper No. 10-WP518, Available at SSRN: https://ssrn.com/abstract=1726002 or http://dx.doi.org/10.2139/ssrn.1726002

Zhen Miao

Iowa State University - Center for Agriculture and Rural Development (CARD) ( email )

Ames, IA 50011
United States

John Beghin (Contact Author)

University of Nebraska Lincoln Agricultural Economics ( email )

Lincoln, NE 68583
United States

Iowa State University - Department of Economics ( email )

383 Heady Hall
Ames, IA 50011
United States

Helen H. Jensen

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
515-294-6253 (Phone)
515-294-6336 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
107
Abstract Views
896
Rank
456,834
PlumX Metrics