ACCOUNTING FOR PRODUCT SUBSTITUTION IN THE ANALYSIS OF FOOD TAXES TARGETING OBESITY
Article first published online: 28 NOV 2012
Copyright © 2012 John Wiley & Sons, Ltd.
Volume 22, Issue 11, pages 1318–1343, November 2013
How to Cite
Miao, Z., Beghin, J. C. and Jensen, H. H. (2013), ACCOUNTING FOR PRODUCT SUBSTITUTION IN THE ANALYSIS OF FOOD TAXES TARGETING OBESITY. Health Econ., 22: 1318–1343. doi: 10.1002/hec.2885
- Issue published online: 16 OCT 2013
- Article first published online: 28 NOV 2012
- Manuscript Accepted: 22 OCT 2012
- Manuscript Revised: 14 SEP 2012
- Manuscript Received: 5 OCT 2011
- low-fat and low-sugar substitutes;
- food demand;
- health policy nutrition;
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. We calibrate this demand system approach using recent food intake data and existing estimates of price and income elasticities of demand. The demand system accounts for both the within-food group substitution and the substitution across these groups. Simulations of taxes on added sugars and solid fat show that the tax impact on consumption patterns is understated and the induced welfare loss is overstated when not allowing for the substitution possibilities within food groups. Copyright © 2012 John Wiley & Sons, Ltd.