Senior Economist Food Economics Division USDAERS Presentation at 中正大學經濟系 May 12 2011 Do Taxes and Subsidies Improve Diet and Health 1 Overweight and Obesity Prevalence in the US ID: 417667
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Slide1
Biing-Hwan LinSenior Economist, Food Economics Division, USDA/ERSPresentation at 中正大學經濟系May 12, 2011
Do Taxes and Subsidies Improve Diet and Health?
1Slide2
Overweight and Obesity Prevalence in the U.S. 1988-94, 1999-2000, 2007-2008Source: National Health and Nutrition Examination Survey, CDC2Slide3
Weight Gains ReflectEnergy imbalance We take in more calories than we expand3Slide4
Rising Calorie Intakes: 1977 to 2006Sources: 1977-78 NFCS, 1989-91 and 1994-98 CSFII, USDA; 2003-6 NHANES, CDC 4Slide5
Trend in Beverage Consumption in the USSources: 1977-78 NFCS, 1989-91 and 1994-98 CSFII, USDA; 1999-2004 NHANES, CDC. 5Slide6
Sources of Calories In the USSources: 1977-78 NFCS, 1989-91 and 1994-98 CSFII, USDA; 2003-6 NHANES, CDC6Slide7
Will Eat More Fruits and Vegetables Help?USAverage Recommendations (cups) Vegetables2.60 Fruits1.80
Average Daily Intake (cups) [% of recommendation]
Vegetables
1.58 [61%]
Fruits
1.03 [57%]
Source: 1999-2002 NHANES, CDC
Fruits and vegetables are rich in water and fiber, low in energy density
Eating more fruits and vegetables promote satiety and decrease energy intake
7Slide8
New Release: Food Marketing Institute(October 8, 2010)FMI Grocery Shopper Trends 2010: Consumers are Savvy and Informed Bargain Hunters When it Comes to Grocery Shopping8Slide9
Pricing policies to improve diet:Two case studies9Taxing Caloric Sweetened Beverages (CSB)Subsidizing fruits, vegetables, and milk Approach
Estimate food demands to obtain demand elasticitiesApply the elasticities to intake data to examine potential effects of pricing policiesSlide10
Taxing Caloric Sweetened Beverages: Potential Effects on Consumption, Calorie Intake, and Obesity. ERS report by Smith, Lin, and Lee, 2010
The Effects of a Sugar-Sweetened Beverage Tax: Consumption, Calorie Intake, Obesity,
and Tax Burden by Income.
AAEA 2010 presentation by Lin, Smith, and Lee
Measuring Weight Outcomes for Obesity Intervention Strategies: The Case of a Sugar-Sweetened Beverage Tax.
Working paper by Lin, Smith, Lee, and Hall
10Slide11
Beverage Demand11Separation of CSBs and their diet counterpartsCSB (sodas, fruit drinks, sports and energy drinks, and powdered mixes)Potential CSB substitutes and complementsDiet drinksMilk (skim, low-fat, and whole)
100% fruit/vegetable juicesCoffee/teasBottled waterSlide12
Nielsen National Consumer Panel, 1998-2007 (Purchase data for demand estimation)12Household purchases of groceries scanned at homeQuantity, expenditure, and demographics
CDC National Health and Nutrition Examination Survey, 2003-6
(Consumption data for intake analysis)
24-hr dietary recall
Comprehensive physical, including weight and heightSlide13
Beverage Consumption, 2003-613Adults
Children
Low-income
High-income
Low-income
High-income
Beverages:
--------------------------- Calories per day ---------------------------
Sugary drinks
197
136
189
195
Diet
drinks
2
3
1
1
Skim
milk
6
13
6
14
Low-fat
milk
37
37
64
85
Whole
milk
37
16
79
38
Juices
38
35
63
50
Tea/Coffee20281110 Bottled water0000Total beverage kcal337269411394
Source: ERS calculation of 2003-06 National Health and Nutrition Examination Survey (NHANES), first-day intake data.Slide14
Effect of soda tax on calorie intake and body weight
-1.292
-0.591
0.344
0.227
-0.054
0.529
-0.185
1.005
(A)
Elasticity
High income
(B)
Elasticity
X
20% tax
Percent
-25.84
-11.82
6.88
4.54
-1.08
10.58
-3.70
20.10
kcal/day
-55.8 kcal
0.0
0.0
5.5
0.0
11.4
-0.1
0.0
(D)
Change in individual daily intake
Beverages
Sugary drinks
Diet drinks
Skim milk
Low fat milk
Whole milk
Juices
Coffee/tea
Bottled water
38.5
kcal/day
-14,053
kcal/yr
-4.0
lbs/yr
(E)
Reduction in calories and weight
kcal/day
216 kcal
0
0
122
0
112
2
0
(C)
Individual daily intake
Example: A 5’10” man weighing 175 pounds would have a BMI of 25.1—overweight.
He drinks a 12 oz. of cola, 8 oz of fruit drink, 8 oz of 2% milk, 8 oz of orange juice, and 8 oz of unsweetened brewed tea.
After the tax, other things being equal, the adult male trims off 4.1 pounds and reduces BMI to 24.5—normal weight.
14Slide15
Estimated Calorie Effects15Changes in consumption (kcal/day):
Adults
Children
High Income
Sugary drinks
-35.2
-50.3
All beverages
-33.3
-44.7
Low Income
Sugary drinks
-37.5
-35.8
All beverages
-36.8
-33.1Slide16
Estimated Weight Effects: by income16Changes in prevalence (%):
Adults
Children
High Income
O
verweight – Before Tax
67.6
30.5
Overweight – After Tax
63.4
24.5
O
besity – Before Tax
33.0
15.0
O
besity – After Tax
30.2
12.0
Low Income
O
verweight – Before Tax
65.1
34.2
Overweight – After Tax
61.1
29.9
O
besity – Before Tax
35.0
17.8
O
besity – After Tax
32.2
15.4Slide17
Static rule of 3500 kcal = 1 poundwidely applied, but over-estimates weight outcome 3500 calories are based on a fixed body composition—75% fat and 25% lean tissueBody composition varies by age, gender, race/ethnicity, and body weightWeight loss is dynamic because energy requirement depends on many factors, including body weightAn initial reduction of energy intake results in weight loss, which in turn reduces the energy requirement and hence weight loss slows down over time.
17Slide18
Weight loss simulations: static vs. dynamic18Slide19
Subsidize purchase of healthy food:fruits, vegetables, and milk19ECONOMIC INCENTIVES FOR DIETARY IMPROVEMENT AMONG FOOD STAMP RECIPIENTS Lin, Yen, Dong, and Smallwood.
Contemporary Economic Policy, 2010,28(4): 524-36Slide20
1999–2002 food intakes, compared with 2005 Dietary GuidelinesFood Stamp RecipientsAverage Recommendations (cups)
Vegetables2.37 Fruits
1.68
Milk products
2.65
Average Daily Intake (cups)
[% of recommendation]
Vegetables
1.26 [53%]
Fruits
0.89[53%]
Milk products
1.39 [53%]Slide21
Data Used21USDA National Food Stamp Program Survey 1996-7, which has household food use records (quantity and expenditure)
National Health and Nutrition Examination Survey 1999-2002, which has a 24-h recall of food intake at home and away from homeSlide22
Selected own- and cross-price elasticities22MilkVegetablesNon-juice fruitsJuiceMilk
-0.79-0.30-0.120.01
Vegetables
-0.02
-0.72
-0.00
-0.02
Non-juice fruits
-0.13
-0.02
-0.81
0.01
Juice
0.01
0.07
0.01
-1.17Slide23
Price subsidy23AssumptionsPrice is subsidized by 10%Subsidy applied to food purchased at grocery stores
Subsidy applied to fruits, vegetables, and fluid milk as is, not mixturesSlide24
Quantity Responses to 10% price subsidy (Food stamp Recipients)24BeforeRecom’dAfter
At homeTotal
Total
At home
Total
Vegetables
(cups)
0.94
1.26
2.37
1.00
1.33
Fruit
(cups)
0.69
0.89
1.68
0.77
0.97
Dairy
(cups)
1.09
1.39
2.65
1.16
1.45Slide25
Summary25In general, food demand is known to be own-price inelastic for broadly defined food categories First Fundamental Theorem of Taxation: a tax has little effect on inelastic goodsAs we disaggregate food groups, food demands tend to become more own-price elastic because of the influences of substitutes and complementsTo simulate the effects of pricing policies on diet and health, it is inappropriate to rely exclusively on the own-price elasticities. Cross-price effects have to be incorporated. Slide26
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