I'm pleased that the Economic Journal has decided to publish the paper Distributional Impacts of Fat Taxes and Thin Subsidies I wrote with Laurent Muller, Anne Lacroix, and Bernard Ruffieux of the University of Grenoble and the French National Institute for Agricultural Research.
Here is an excerpt
Our approach to addressing this issue is quite different than that of previous studies. Here's what's unique about our appoarch
Here is one of the key figures from the paper. The figure shows the distribution of price indices (i.e., the relative change in prices paid) after the introduction of a combined unhealthy-food-tax and healthy-food-subsidy policy for low income women as compared to a reference group (i.e, "normal" income women).
The Laspeyres index calculates the change in prices paid relative to the initial pattern of consumption; the Paasche index is similar except that it weights prices paid using the new pattern of consumption. A greater difference between the two indices reveals greater substitution and responsiveness to the policy.
The figure above shows that 25-30% of the low income consumers paid more for food after the price policy (they had an index greater than 100), and given the similarity of the two red lines, were less responsive (perhaps because of being more habit prone) than the richer consumers. Moreover, at the individual level, the Paasche index was higher than the Laspeyres index for 35.9% of low income individuals. These individuals did not shift their diet in the intended direction.
We ended the paper as follows: