Optimal Taxation and Food Policy: Impacts of Food Taxes on Nutrient Intakes. New Directions in Welfare – OECD, Paris – July 2011. Thomas Allen (University of Perpignan, CIHEAM/IAMM-MOISA and INRA-ALISS) Olivier Allais (INRA-ALISS) Véronique Nichèle (INRA-ALISS)
Optimal Taxation and Food Policy: Impacts of Food Taxes
on Nutrient Intakes
New Directions in Welfare – OECD, Paris – July 2011
Thomas Allen (University of Perpignan, CIHEAM/IAMM-MOISA and INRA-ALISS)
Olivier Allais (INRA-ALISS)
Véronique Nichèle (INRA-ALISS)
Martine Padilla (CIHEAM/IAMM-MOISA)
Increase in the prevalence of obesity and overweight in France since 1990 (Obépi, 2009);
Higher risk of illnesses for which nutrition is an essential determinant, among the low-income groups (InVS, 2006)
Nutrient-rich food are associated with higher diet costs and energy-dense food with lower costs (Darmon et al., 2007);
Public Health authorities’ questioning and academic discussion on the prospect of potential « fat taxes ».
How best to design a fiscal policy improving households’ allocation of goods in terms of nutrient adequacy to recommendations?
Identify the optimal price conditions improving households’ diet quality.
Ramsey rule: The reduction in demand for each good, caused by the tax system, should be proportional for each good.
Inverse elasticity rule: Optimal tax rates on each good should be inversely proportional to the good’s own–price elasticity of demand.
Taxes' objective:Transforming consumption behaviours.
Planner's objectif: Maximise social welfare under the constraint that the overall diet quality of consumers' food basket reach a minimum level in terms of nutrient adequacy to recommendations.
Optimal financing criteria : The optimal tax rates, for each good, are decreasing functions of their own-price elasticity of demand.
Optimal adequation criteria: The optimal tax rates, for each good, are decreasing functions of their « nutritional quality/ price » ratio.
Where quali, p and x are vectors of the diet quality indicators, initial prices and quantities associated with each good and e the own and cross price elasticities.
Selection of the Almost Ideal Demand System model (Deaton and Muellbauer, 1980):
Iterated Least Square Estimator (Blundell and Robin, 1999).
- 156 periods: 1996-2007
- 8 cohorts: Date of birth/Social status
- 27 food groups
Homogenous categories in terms of nutritional content (fruits/vegetables fresh/processed, snacks/already prepared meals, vegetable/animal fat, salty/sugary fat).
24 clusters of price according to Localisation/Social status.
The MAR for a 100g of food i:
The MAR for a food basket:
The LIM for a 100g o food i:
The LIM for a food basket:
The SAIN for a 100g of food i:
The SAIN for a food basket:
Uncompensated own-price elasticities
Welfare losses homogeneously spread over all income groups.
Theoretical result: A « diet quality/price » ratio and an augmented inverse elasticity rule;
Empirical results: Mixed evidence supporting food taxation:
- Low price elasticities and high tax rates;
- Weak convergence on food groups to tax/ subsidize accross nutrient adequacy indicators.
Methodology – Optimal taxation (2)
Use of the Lagragian Method to obtain a system of n+2 linear and non-linear equations and n+2 unknowns.