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Fat Taxes

Two recent students on "fat taxes" have emerged in the economics sphere.

Here is the abstract of a paper by Chen Zen and colleagues in the American Journal of Agricultural Economics

A censored Exact Affine Stone Index incomplete demand system is estimated for 23 packaged foods and beverages and a numéraire good. Instrumental variables are used to control for endogenous prices. A half-cent per ounce increase in sugar-sweetened beverage prices is predicted to reduce total calories from the 23 foods and beverages but increase sodium and fat intakes as a result of product substitution. The predicted decline in calories is larger for low-income households than for high-income households, although welfare loss is also higher for low-income households. Neglecting price endogeneity or estimating a conditional demand model significantly overestimates the calorie reduction.
Here is an exerpt of an NBER working paper by Harding and Lovenheim
Our main finding is that nutrient-specific taxes have much larger effects on nutrition than do the product-specific taxes we study. However, they do not cost more in terms of consumer utility. While a 20% soda tax reduces sugar purchases by 10.35%, it only reduces overall caloric intake by 4.84%. Taxing packaged meals actually increases slightly overall caloric intake, even though this product group is the unhealthiest per serving. Taxing snacks/candy also has at most small impacts on the purchased nutritive bundle.

In contrast, taxing nutrients has large impacts on nutrition without producing larger welfare losses than product-specific taxes, largely because of the broad-based nature of these taxes. Among the three nutrient-specific taxes, sugar taxes stand out as particularly effective. A 20% sugar tax reduces sugar consumption by 16.41% while also reducing caloric intake by 18.54% and salt consumption by 9.63%. Consumer indirect utility declines by 2.6% as a result, which is very similar to the utility cost of a soda tax and SSB tax.

Two points.

First, both these studies show certain kinds of taxes can have some effect on intake (although often in less than anticipated ways). However, even the most effective taxes (in both studies) causes consumer welfare to fall - although these are rarely discussed in dollar terms.

Second, we already have something akin to a sugar tax - farm policies that include production allotments, quotas, and trade restrictions which make sugar 2 to 3 times more expensive in the US compared to the rest of the world. Of course, we also subsidize corn, which makes HFCS relatively less expensive. Here is a nice paper by John Beghin and Helen Jensen on some of the economics of sugar policies.


Effects of sub-therapeutic antibiotics on efficiency of hog farms

From a recent article appearing in the American Journal of Agricultural Economics by USDA economists Nigel Key and William McBride:

A substantial share of U.S. hog producers incorporate antimicrobial drugs into their livestock's feed or water at sub-therapeutic levels to promote feed efficiency and weight gain. Recently, in response to concerns that the overuse of antibiotics in livestock could promote the development of antimicrobial drug-resistant bacteria, the U.S. Food and Drug Administration adopted a strategy to phase out the use of antibiotics for production purposes. This study uses a stochastic frontier model and data from the 2009 USDA Agricultural Resource Management Survey of feeder-to-finish hog producers to estimate the potential effects on hog output and output variability resulting from a ban on antibiotics used for growth promotion. We use propensity score nearest neighbor matching to create a balanced sample of sub-therapeutic antibiotic (STA) users and nonusers. We estimate the frontier model for the pooled sample and separately for users and non-users—which allows for a flexible interaction between STA use and the production technology. Point estimates for the matched sample indicate that STA use has a small positive effect on productivity and production risk, increasing output by 1.0–1.3% and reducing the standard deviation of unexplained output by 1.4%. The results indicate that improvements in productivity resulted exclusively from technological improvement rather than from an increase in technical efficiency.

Now, that doesn't mean sub-therapeutic antibiotics should be used in animal agriculture, but this does provide one estimate of the benefits that can be compared against the potential costs that might arise as a result of resistance, etc.

FooDS January 2014

We just posted the latest release of the monthly Food Demand Survey (FooDS).  

Demand for most meat products was up in January relative to December, as was awareness and concern for the 17 food issues we track.  The biggest jumps in awareness in the news occurred for swine flu and bird flu. 

As in the past, we added a few ad-hoc questions to the survey.  

The first ad-hoc question aimed to get at the perceived trustworthiness of different sources of information about meat and livestock (the idea for the question was suggested to me by Marco Costanigro at CSU).  

We asked, “How trustworthy is information about meat and livestock from the following sources?” Fifteen sources were listed (the order randomly varied across respondents), and respondents had to place five sources in the most trustworthy category and five sources in the least trustworthy category. A scale of importance was created by calculating the proportion of times a meat and livestock information source as ranked most trustworthy minus the proportion of times it was ranked least trustworthy.

I was a little surprised by some of the findings.

trustsources.JPG

The USDA and FDA were reported as most trustworthy with 50% more people indicating the source as most trustworthy than least. A University professor from Harvard were seen as slightly more trustworthy than one from Texas A&M, but both were viewed as less trustworthy than interest groups like the Farm Bureau, the CSPI, or the HSUS.

News organizations, and particularly food companies, were viewed as least trustworthy. Chipotle was the seen as the least trust worthy organization studied – the restaurant chain was placed in the least trustworthy category 69% more often than in the most trustworthy category.

We also asked an open-ended question: “Do you have any food-related goals for the new year?”  You can find the categorization of responses here.  I give the award for the most honest answer to this response:

I hope to lose weight, but that's the goal every new year which is never met