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Biing-Hwan Lin Biing-Hwan Lin

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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

tax food weight intake food tax intake weight vegetables fruits milk kcal price effects income cups energy drinks consumption

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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

謝謝26

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