Cash Incentives and Unhealthy Food Consumption

Javier Rivas and Miguel Flores ()

No 11/47, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: The costs associated with unhealthy food consumption are not only paid by those suffering from overweight but by all members of society in terms of higher costs for social security systems. With this in mind, we study the effectiveness of a tax, a subsidy and cash incentives in reducing unhealthy food consumption. Using an inter-temporal rational choice model with habit, we calibrate and simulate the effect of those policies to US and UK data. Our findings suggest that cash incentives may be the most effective policy in reducing unhealthy food consumption yet it can be the most costly one. Taxes are relatively ineffective in reducing unhealthy food consumption. Subsidies have the best balance between effectiveness and monetary benefits to the society.

Keywords: Habit; Junk Food; Overweight; Public Policy; Rational Addiction (search for similar items in EconPapers)
JEL-codes: D04 D11 H31 (search for similar items in EconPapers)
Date: 2011-10, Revised 2012-01
New Economics Papers: this item is included in nep-agr and nep-hea
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