Equilibrium Effects of Food Labeling Policies

Nano Barahona, Cristóbal Otero () and Sebastian Otero

MPRA Paper from University Library of Munich, Germany

Abstract: We study a regulation in Chile that mandates warning labels on products whose sugar or caloric concentration exceeds certain thresholds. We show that consumers substitute from labeled to unlabeled products—a pattern mostly driven by products that consumers mistakenly believe to be healthy. On the supply side, we find substantial reformulation of products and bunching at the thresholds. We develop and estimate an equilibrium model of demand for food and firms’ pricing and nutritional choices. We find that food labels increase consumer welfare by 1.6% of total expenditure, and that these effects are enhanced by firms’ responses. We then use the model to study alternative policy designs. Under optimal policy thresholds, food labels and sugar taxes generate similar gains in consumer welfare, but food labels benefit the poor relatively more

Keywords: Food labels; equilibrium effects; misinformation; sugar taxes. (search for similar items in EconPapers)
JEL-codes: D12 D22 I12 I18 L11 L81 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-agr and nep-hea
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:114597

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