Modelling the health impact of food taxes and subsidies with price elasticities: The case for additional scaling of food consumption using the total food expenditure elasticity.
ABSTRACT: BACKGROUND:Food taxes and subsidies are one intervention to address poor diets. Price elasticity (PE) matrices are commonly used to model the change in food purchasing. Usually a PE matrix is generated in one setting then applied to another setting with differing starting consumptions and prices of foods. This violates econometric assumptions resulting in likely mis-estimation of total food consumption. In this paper we demonstrate this problem, canvass possible options for rescaling all consumption after applying a PE matrix, and illustrate the use of a total food expenditure elasticity (TFEe; the expenditure elasticity for all food combined given the policy-induced change in the total price of food). We use case studies of: NZ$2 per 100g saturated fat (SAFA) tax, NZ$0.4 per 100g sugar tax, and a 20% fruit and vegetable (F&V) subsidy. METHODS:We estimated changes in food purchasing using a NZ PE matrix applied conventionally, and then with TFEe adjustment. Impacts were quantified for pre- to post-policy changes in total food expenditure and health adjusted life years (HALYs) for the total NZ population alive in 2011 over the rest of their lifetime using a multistate lifetable model. RESULTS:Two NZ studies gave TFEe's of 0.68 and 0.83, with international estimates ranging from 0.46 to 0.90 (except a UK outlier of 0.04). Without TFEe adjustment, total food expenditure decreased with the tax policies and increased with the F&V subsidy-implausible directions of shift given economic theory and the external TFEe estimates. After TFEe adjustment, HALY gains reduced by a third to a half for the two taxes and reversed from an apparent health loss to a health gain for the F&V subsidy. With TFEe adjustment, HALY gains (in 1000's) were: 1,805 (95% uncertainty interval 1,337 to 2,340) for the SAFA tax; 1,671 (1,220 to 2,269) for the sugar tax; and 953 (453 to 1,308) for the F&V subsidy. CONCLUSIONS:If PE matrices are applied in settings beyond where they were derived, additional scaling is likely required. We suggest that the TFEe is a useful scalar, but we also encourage other researchers to examine this issue and propose alternative options.
Project description:BACKGROUND:Health-related food taxes and subsidies may promote healthier diets and reduce mortality. Our aim was to estimate the effects of health-related food taxes and subsidies on deaths prevented or postponed (DPP) in New Zealand. METHODS:A macrosimulation model based on household expenditure data, demand elasticities and population impact fractions for 18 diet-related diseases was used to estimate effects of five tax and subsidy regimens. We used price elasticity values for 24 major commonly consumed food groups in New Zealand, and food expenditure data from national Household Economic Surveys. Changes in mortality from cardiovascular disease, cancer, diabetes and other diet-related diseases were estimated. FINDINGS:A 20% subsidy on fruit and vegetables would result in 560 (95% uncertainty interval, 400 to 700) DPP each year (1.9% annual all-cause mortality). A 20% tax on major dietary sources of saturated fat would result in 1,500 (950 to 2,100) DPP (5.0%), and a 20% tax on major dietary sources of sodium would result in 2,000 (1300 to 2,700) DPP (6.8%). Combining taxes on saturated fat and sodium with a fruit and vegetable subsidy would result in 2,400 (1,800 to 3,000) DPP (8.1% mortality annually). A tax on major dietary sources of greenhouse gas emissions would generate 1,200 (750 to 1,700) DPP annually (4.0%). Effects were similar or greater for Maori and low-income households in relative terms. CONCLUSIONS:Health-related food taxes and subsidies could improve diets and reduce mortality from diet-related disease in New Zealand. Our study adds to the growing evidence base suggesting food pricing policies should improve population health and reduce inequalities, but there is still much work to be done to improve estimation of health impacts.
Project description:<h4>Background</h4>An increasing number of countries are implementing taxes on unhealthy foods and drinks to address the growing burden of dietary-related disease, but the cost-effectiveness of combining taxes on unhealthy foods and subsidies on healthy foods is not well understood.<h4>Methods and findings</h4>Using a population model of dietary-related diseases and health care costs and food price elasticities, we simulated the effect of taxes on saturated fat, salt, sugar, and sugar-sweetened beverages and a subsidy on fruits and vegetables, over the lifetime of the Australian population. The sizes of the taxes and subsidy were set such that, when combined as a package, there would be a negligible effect on average weekly expenditure on food (<1% change). We evaluated the cost-effectiveness of the interventions individually, then determined the optimal combination based on maximising net monetary benefit at a threshold of AU$50,000 per disability-adjusted life year (DALY). The simulations suggested that the combination of taxes and subsidy might avert as many as 470,000 DALYs (95% uncertainty interval [UI]: 420,000 to 510,000) in the Australian population of 22 million, with a net cost-saving of AU$3.4 billion (95% UI: AU$2.4 billion to AU$4.6 billion; US$2.3 billion) to the health sector. Of the taxes evaluated, the sugar tax produced the biggest estimates of health gain (270,000 [95% UI: 250,000 to 290,000] DALYs averted), followed by the salt tax (130,000 [95% UI: 120,000 to 140,000] DALYs), the saturated fat tax (97,000 [95% UI: 77,000 to 120,000] DALYs), and the sugar-sweetened beverage tax (12,000 [95% UI: 2,100 to 21,000] DALYs). The fruit and vegetable subsidy (-13,000 [95% UI: -44,000 to 18,000] DALYs) was a cost-effective addition to the package of taxes. However, it did not necessarily lead to a net health benefit for the population when modelled as an intervention on its own, because of the possible adverse cross-price elasticity effects on consumption of other foods (e.g., foods high in saturated fat and salt). The study suggests that taxes and subsidies on foods and beverages can potentially be combined to achieve substantial improvements in population health and cost-savings to the health sector. However, the magnitude of health benefits is sensitive to measures of price elasticity, and further work is needed to incorporate potential benefits or harms associated with changes in other foods and nutrients that are not currently modelled, such as red and processed meats and fibre.<h4>Conclusions</h4>With potentially large health benefits for the Australian population and large benefits in reducing health sector spending on the treatment of non-communicable diseases, the formulation of a tax and subsidy package should be given a more prominent role in Australia's public health nutrition strategy.
Project description:<h4>Objective</h4>To estimate 2012 tax expenditures for employer-sponsored insurance (ESI) in the United States and to explore the sensitivity of estimates to assumptions regarding the incidence of employer premium contributions.<h4>Data sources</h4>Nationally representative Medical Expenditure Panel Survey data from the 2005-2007 Household Component (MEPS-HC) and the 2009-2010 Insurance Component (MEPS IC).<h4>Study design</h4>We use MEPS HC workers to construct synthetic workforces for MEPS IC establishments, applying the workers' marginal tax rates to the establishments' insurance premiums to compute the tax subsidy, in aggregate and by establishment characteristics. Simulation enables us to examine the sensitivity of ESI tax subsidy estimates to a range of scenarios for the within-firm incidence of employer premium contributions when workers have heterogeneous health risks and make heterogeneous plan choices.<h4>Principal findings</h4>We simulate the total ESI tax subsidy for all active, civilian U.S. workers to be $257.4 billion in 2012. In the private sector, the subsidy disproportionately flows to workers in large establishments and establishments with predominantly high wage or full-time workforces. The estimates are remarkably robust to alternative incidence assumptions.<h4>Conclusions</h4>The aggregate value of the ESI tax subsidy and its distribution across firms can be reliably estimated using simplified incidence assumptions.
Project description:BACKGROUND:A sugar-sweetened beverage (SSB) tax in Mexico has been effective in reducing consumption of SSBs, with larger decreases for low-income households. The health and financial effects across socioeconomic groups are important considerations for policy-makers. From a societal perspective, we assessed the potential cost-effectiveness, health gains, and financial impacts by socioeconomic position (SEP) of a 20% SSB tax for Australia. METHODS AND FINDINGS:Australia-specific price elasticities were used to predict decreases in SSB consumption for each Socio-Economic Indexes for Areas (SEIFA) quintile. Changes in body mass index (BMI) were based on SSB consumption, BMI from the Australian Health Survey 2011-12, and energy balance equations. Markov cohort models were used to estimate the health impact for the Australian population, taking into account obesity-related diseases. Health-adjusted life years (HALYs) gained, healthcare costs saved, and out-of-pocket costs were estimated for each SEIFA quintile. Loss of economic welfare was calculated as the amount of deadweight loss in excess of taxation revenue. A 20% SSB tax would lead to HALY gains of 175,300 (95% CI: 68,700; 277,800) and healthcare cost savings of AU$1,733 million (m) (95% CI: $650m; $2,744m) over the lifetime of the population, with 49.5% of the total health gains accruing to the 2 lowest quintiles. We estimated the increase in annual expenditure on SSBs to be AU$35.40/capita (0.54% of expenditure on food and non-alcoholic drinks) in the lowest SEIFA quintile, a difference of AU$3.80/capita (0.32%) compared to the highest quintile. Annual tax revenue was estimated at AU$642.9m (95% CI: $348.2m; $1,117.2m). The main limitations of this study, as with all simulation models, is that the results represent only the best estimate of a potential effect in the absence of stronger direct evidence. CONCLUSIONS:This study demonstrates that from a 20% tax on SSBs, the most HALYs gained and healthcare costs saved would accrue to the most disadvantaged quintiles in Australia. Whilst those in more disadvantaged areas would pay more SSB tax, the difference between areas is small. The equity of the tax could be further improved if the tax revenue were used to fund initiatives benefiting those with greater disadvantage.
Project description:In this paper we appraise current agricultural subsidy policy in the EU. Several sources of its inefficiency are identified: it is inefficient for supporting farmers' incomes or guaranteeing food security, and irrational transfer payments decoupled from actual performance that may be negative for environmental protection, social cohesion, etc. Based on a simplified economic model, we prove that there is "reverse redistribution" in the current tax-subsidy system, which cannot be avoided. To find a possible way to distribute subsidies more efficiently and equitably, several alternative subsidy systems (the pure loan, the harvest tax and the income contingent loan) are presented and examined.
Project description:BACKGROUND:Implementation of food taxes or subsidies may promote healthier and a more sustainable diet in a society. This study estimates the effects of a tax (15% or 30%) on meat and a subsidy (10%) on fruit and vegetables (F&V) consumption in the Netherlands using a social cost-benefit analysis with a 30-year time horizon. METHODS:Calculations with the representative Dutch National Food Consumption Survey (2012-2014) served as the reference. Price elasticities were applied to calculate changes in consumption and consumer surplus. Future food consumption and health effects were estimated using the DYNAMO-HIA model and environmental impacts were estimated using Life Cycle Analysis. The time horizon of all calculations is 30?year. All effects were monetarized and discounted to 2018 euros. RESULTS:Over 30-years, a 15% or 30% meat tax or 10% F&V subsidy could result in reduced healthcare costs, increased quality of life, and higher productivity levels. Benefits to the environment of a meat tax are an estimated €3400 million or €6300 million in the 15% or 30% scenario respectively, whereas the increased F&V consumption could result in €100 million costs for the environment. While consumers benefit from a subsidy, a consumer surplus of €10,000 million, the tax scenarios demonstrate large experienced costs of respectively €21,000 and €41,000 million. Overall, a 15% or 30% price increase in meat could lead to a net benefit for society between €3100-7400 million or €4100-12,300 million over 30?years respectively. A 10% F&V subsidy could lead to a net benefit to society of €1800-3300 million. Sensitivity analyses did not change the main findings. CONCLUSIONS:The studied meat taxes and F&V subsidy showed net total welfare benefits for the Dutch society over a 30-year time horizon.
Project description:<h4>Objective</h4>To provide the first published estimates of the price elasticity of demand for cigarettes in Uganda and thereby contribute to growing the evidence base of the likely impact of excise taxes on cigarette consumption and tax revenues in Sub-Saharan Africa.<h4>Method</h4>We use a linear approximation of the Almost Ideal Demand System along with expenditure data from the Uganda National Panel Survey and exploit the fact that prices of cigarettes vary across geographical space in Uganda.<h4>Results</h4>We find that cigarettes are price inelastic in Uganda with elasticity estimates ranging between -0.26 and -0.33. That is, we expect that cigarette demand will decline by between 2.6% and 3.3% every time cigarette prices rise by 10%. These elasticity estimates are in line with international evidence and are robust to outliers in the data.<h4>Conclusion</h4>Our estimates of the price elasticity of demand for cigarettes suggest that the authorities in Uganda can reduce cigarette consumption and simultaneously increase tax revenues by increasing the excise taxes on cigarettes.
Project description:This study examines whether policies to encourage cattle ranching intensification in Brazil can abate global greenhouse gas (GHG) emissions by sparing land from deforestation. We use an economic model of global land use to investigate, from 2010 to 2030, the global agricultural outcomes, land use changes, and GHG abatement resulting from two potential Brazilian policies: a tax on cattle from conventional pasture and a subsidy for cattle from semi-intensive pasture. We find that under either policy, Brazil could achieve considerable sparing of forests and abatement of GHGs, in line with its national policy targets. The land spared, particularly under the tax, is far less than proportional to the productivity increased. However, the tax, despite prompting less adoption of semi-intensive ranching, delivers slightly more forest sparing and GHG abatement than the subsidy. This difference is explained by increased deforestation associated with increased beef consumption under the subsidy and reduced deforestation associated with reduced beef consumption under the tax. Complementary policies to directly limit deforestation could help limit these effects. GHG abatement from either the tax or subsidy appears inexpensive but, over time, the tax would become cheaper than the subsidy. A revenue-neutral combination of the policies could be an element of a sustainable development strategy for Brazil and other emerging economies seeking to balance agricultural development and forest protection.
Project description:<h4>Background</h4>Given the high importance of dietary sodium (salt) as a global disease risk factor, our objective was to compare the impact of eight sodium reduction interventions, including feasible and more theoretical ones, to assist prioritisation.<h4>Methods</h4>Epidemiological modelling and cost-utility analysis were performed using a Markov macro-simulation model. The setting was New Zealand (NZ) (2.3 million citizens, aged 35+ years) which has detailed individual-level administrative cost data.<h4>Results</h4>Of the most feasible interventions, the largest health gains were from (in descending order): (i) mandatory 25% reduction in sodium levels in all processed foods; (ii) the package of interventions performed in the United Kingdom (UK); (iii) mandatory 25% reduction in sodium levels in bread, processed meats and sauces; (iv) media campaign (as per a previous UK one); (v) voluntary food labelling as currently used in NZ; (vi) dietary counselling as currently used in NZ. Even larger health gains came from the more theoretical options of a "sinking lid" on the amount of food salt released to the national market to achieve an average adult intake of 2300 mg sodium/day (211,000 QALYs gained, 95% uncertainty interval: 170,000-255,000), and from a salt tax. All the interventions produced net cost savings (except counseling--albeit still cost-effective). Cost savings were especially large with the sinking lid (NZ$ 1.1 billion, US$ 0.7 billion). Also the salt tax would raise revenue (up to NZ$ 452 million/year). Health gain per person was greater for M?ori (indigenous population) men and women compared to non-M?ori.<h4>Conclusions</h4>This study substantially expands on the range of previously modelled salt reduction interventions and suggests that some of these might achieve major health gains and major cost savings (particularly the regulatory interventions). They could also reduce ethnic inequalities in health.
Project description:Framing of fiscal incentives has been suggested to be important in influencing purchase decisions. We aimed to examine the effect of framing a modest price difference between high- and lower-sugar beverages as a tax or a subsidy respectively, using messages placed on vending machines to influence beverage purchases.This is an 11-week randomized crossover trial conducted between August and November 2015, with a two-week run-in period before intervention, targeted at students, staff and faculty of a university campus in Singapore. Twenty-one beverage vending machines were used to implement the intervention involving 'tax message', 'subsidy message' and 'no message (control)'. The former two messages suggest 'a tax for high sugar beverages' or 'a subsidy for lower sugar beverages' respectively. Prices of the beverages offered were fixed at baseline and remained the same in all three experimental conditions: lower-sugar beverage options were priced ~?10% lower than the corresponding high-sugar option. The machines were randomized to one of the 6 sequences of intervention. Each message intervention period was 3 weeks. The effect of messages was assessed by comparing average weekly units of beverages sold between interventions using mixed effects model.The average weekly units of high and lower-sugar beverages sold per vending machine were 115 and 98 respectively in the control condition. The percentage of high-sugar beverages sold was 54% in the control, 53% in the tax, and 54% in the subsidy message condition. There was no difference in the weekly units of high-sugar beverages sold for the tax message (-?2, 95% CI -8 to 5, p?=?0.61) or the subsidy message (0, 95% CI -10 to 10, p?=?0.96) conditions as compared with the control condition. Similarly, there was no difference in the weekly units of lower-sugar beverages sold for the tax message (4, 95% CI -4 to 13, p?=?0.32) or the subsidy message (7, 95% CI -4 to 18, p?=?0.18) conditions as compared with the control condition.The use of tax and subsidy messages to highlight modest price differences did not substantially reduce high-sugar beverage sales in vending machines on an Asian university campus.