Direct and indirect impact of food taxes and subsidies on food consumption and population health

Lead Research Organisation: London Sch of Hygiene and Trop Medicine
Department Name: Public Health and Policy

Abstract

Obesity and the implications of high bodyweight are among the greatest challenges facing health systems worldwide, including in the UK. Implications arise from an increased burden of preventable non-communicable diseases (NCD's), including diabetes, cardiovascular diseases and several cancers. The number of obese people in the UK has recently been forecast to increase by 11 million by 2030 with associated combined medical costs of £1.9-2bn per year. Given the scale and urgency of the problem there is a need for effective measures to slow this trend, and food consumption and diets are one of the key areas for health policy to focus.

This fellowship project will provide an assessment of the effectiveness of food taxes and subsidies in changing food consumption towards healthier diets and thereby improving population health outcomes. It will build on existing evidence but will bring in new theoretical insights and use innovative data. Consumption of unhealthy foods can be reduced by increasing their price through taxes, whereas the consumption of healthy foods can be promoted by decreasing prices through subsidies. Taxes and subsidies therefore offer a potentially powerful policy tool to affect food consumption, diets and health. However, the empirical evidence shows that taxes have to be relatively high to have a meaningful effect and the evidence on the effectiveness of subsidies is small with mixed findings. This research project incorporates novel aspects by testing the linearity of consumers' response to changes in prices. First, it tests whether consumers are more responsive to taxes compared to subsidies. Secondly it will test whether the relative response to taxes or subsidies changes when the scale of taxes and subsidies change.

Another aspect that current evidence often fails to incorporate, and what this study will explicitly address, is the indirect effects of taxes and subsidies, mainly towards the consumption of other foods or beverages. For example a increase in the price of beef may reduce its consumption but at the same time increase the consumption of, now relatively cheaper, chicken which happens to be a healthier alternative. However, substitution could happen instead towards unhealthier foods. Also, consumers may still continue buying the now higher priced food but reduce the quantity of all other foods they consume in order to continue affording it, including eating less of healthy foods such as vegetables. Similar effects can occur when subsidies for healthy foods are introduced. These indirect effects can therefore reinforce or undermine the impact of food taxes or subsidies and are important to consider.

The research will include two empirical studies. The first will use econometric models to analyse changes in food consumption due to price changes using a large nationally representative household data set from the UK from 2012-2013. The second empirical study will collect and analyse primary data from an experimental study where the response in consumption decisions to various scenarios of taxes and subsidies on a range of foods will be tested.

For an appropriate policy response to the growing obesity problem, a detailed knowledge of the effectiveness of price-based policy measures is required. Although food taxes and subsidies are currently being considered in developed countries, the growing prevalence of obesity and non-communicable disease in parallel to under-nutrition in less developed countries suggests that soon the governments of these countries will also be seeking effective solutions. Thus this project has the potential to have an impact reaching beyond the UK and developed world.

The project will be carried out by health economists from the London School of Hygiene & Tropical Medicine and will involve collaborations with researchers from the University of Cambridge, the School of Oriental and African Studies and the University of Bologna.

Technical Summary

The fellowship project aims to enhance the existing evidence on the effectiveness of taxes and subsidies in influencing consumers towards healthier food consumption, and thus on health outcomes. Specific objectives are:
Obj 1. To test if, in the context of food consumption, people change consumption patterns less when subsidies are involved compared to their reaction to taxes.
Obj 2. To test whether consumers' response can be assumed to be linear with respect to large and small taxes and subsidies.
Obj 3. To test whether the indirect (cross-price and income) effects undermine, reinforce or do not affect the direct impact (own-price effect) of taxes and subsidies on food consumption.
Obj 4. To analyse whether taxes and subsidies have further indirect effects on non-food consumption patterns.
Obj 5. To explore the importance of other determinants of demand, such as habits and preferences, in consumer decisions.
Obj 6. To test whether the above effects vary across different socio-economic groups or other sub-populations defined by the quantities of foods consumed or the BMI measure.
These objectives will be achieved through implementation of two empirical studies. The first will use a highly disaggregated household panel micro-data set from Kantar World Panel UK and apply econometric models based on the Quadratic Almost Ideal Demand System (QAIDS). The QAIDS model will be extended to enable exploration of differential response mechanisms with respect to price increases and decreases, for example by implementing a two-stage approach where the first stage discriminates between the two situations.
The second study will employ discrete choice experiment methodology to test the consumers' response to food taxes and subsidies. The experimental setting allows relaxing neo-classical assumption of consumer rationality and test the (in)direct impact of various scenarios of taxes and subsidies and explore the role of other attributes that affect consumption choice.

Planned Impact

The research carried out during the fellowship will benefit following people and institutions:
a) Myself: through the knowledge and skills acquired during the fellowship I will be able to continue developing to become an independent researcher in health economics and establish my research platform. In the long-run I want to be a leader in the field and producing high-quality research, teach and supervise others' research activity.
b) LSHTM will benefit from this research through a more diversified research portfolio, and high-quality research outputs.
c) LCIRAH. By continuing to stay as a member of the LCIRAH core group the centre will benefit from this project through presentations in its seminars, conference, and publication of a policy brief. The project fits under LCIRAH's overarching research question on how to achieve sustainable food and agriculture systems which promote health and well-being for all people and will thus add to the research its staff and members are conducting.
d) Academia. This research will introduce novel aspects which have not been explored before to address the shortcomings of and refine current evidence in the assessment of effectiveness of food taxes and beverages on health outcomes. It will offer new methodological approaches and will bring new insights into consumer behaviour towards food and is likely to spark new ideas and instigate further research.
e) Health policy makers. The project aims to provide evidence-based answers that help in deciding on and/or designing price based policies to influence food or beverage consumption habits. The scientific papers and other research output (for example a LCIRAH policy brief) from the project will include clearly written policy suggestions that health policy makers can benefit from.
f) Health charities, lobby groups and other interest groups who wish to influence health policy regarding reductions in obesity and NCD's. These groups will benefit as their work can be based on peer-reviewed and published research findings.
g) Ultimately the beneficiaries of this research are the people whose health and life quality can be improved by effective policies through reduction in obesity and NCD prevalence rate. Healthier people mean healthier workforce and thus savings at both private and national level from lower medical costs and reduced work absence which will eventually boost economic growth for the country. Furthermore, resources saved from lower prevalence of obesity and NCD's can be used elsewhere to improve other public services.
h) In the longer run it is not just the UK and developed countries that benefit but also developing countries where the growing issue of double burden of disease means that these governments will be seeking effective solutions including these tested in developed countries.

Publications

10 25 50

 
Description Citation in Food Foundation report "Force Fed"
Geographic Reach National 
Policy Influence Type Citation in other policy documents
URL http://foodfoundation.org.uk/wp-content/uploads/2016/01/The-Food-Foundation-64pp-A4-Landscape-Brochu...
 
Description Citation in PHE report "Sugar reduction - evidence for action" (annex 2)
Geographic Reach National 
Policy Influence Type Citation in other policy documents
URL https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/470173/Annexe_2._Fiscal_ev...
 
Description Bloomsbury PhD (AMR)
Amount £70,000 (GBP)
Organisation Bloomsbury Colleges 
Sector Academic/University
Country United Kingdom
Start 09/2017 
End 08/2020
 
Description Bloomsbury PhD Studentships
Amount £70,000 (GBP)
Organisation Bloomsbury Colleges 
Sector Academic/University
Country United Kingdom
Start 09/2016 
End 08/2019
 
Description Evaluation of the health impacts of the UK Treasury Soft Drinks Industry Levy (SDIL)
Amount £1,498,956 (GBP)
Funding ID PHR/16/130/01 
Organisation National Institute for Health Research 
Sector Public
Country United Kingdom
Start 07/2017 
End 12/2021
 
Description Sustainable and Healthy Food Systems
Amount £5,000,000 (GBP)
Organisation Wellcome Trust 
Sector Charity/Non Profit
Country United Kingdom
Start 07/2017 
End 05/2022
 
Title Asymmetric demand model 
Description We build on the classical consumer theory to adapt a well recognised Almost Ideal Demand System Approach to allow consideration of reference price effects and thus estimate separately demand price elasticities for increasing and decreasing prices. 
Type Of Material Data analysis technique 
Year Produced 2016 
Provided To Others? No  
Impact The theoretical paper proposing this new approach is currently under review with a journal but once accepted, I believe it will have a notable impact in providing an alternative method for estimating more accurate price sensitivity of consumption. We have further used the model to estimate the impact of increasing and decreasing prices on 26 different food and beverage groups (currently under review) 
 
Title DCE full study 
Description Discrete choice experiment on beverage choice testing the framing effects of sugary drinks taxes. Experiment is ran among 603 respondents in the UK, selected from the Kantar Worldpanel sample 
Type Of Material Database/Collection of data 
Year Produced 2017 
Provided To Others? No  
Impact not available yet 
 
Title DCE pilot 
Description Data on non-alcoholic beverage preferences is collected from a sample UK households with children who consume sugary drinks on a regular basis. The data is collected through questionnaire designed as a discrete choice experiment. Currently only pilot data is collected 
Type Of Material Database/Collection of data 
Provided To Others? No  
Impact The pilot will help in designing a design for the questionnaire to be sent to the full sample of 600 households 
 
Title Kantar data 
Description We have purchased home-scan household expenditure data on foods and beverages between 2012-2017 . this allows to analyse in great detail household food related behaviours and test possible effects of any changes and interventions that have taken place in the past 7 years 
Type Of Material Database/Collection of data 
Year Produced 2017 
Provided To Others? No  
Impact publications 
 
Description Collaboration with Mario Mazzocchi 
Organisation University of Bologna
Department Department of Statistics
Country Italy 
Sector Academic/University 
PI Contribution Mario is helping me with my fellowship project.
Collaborator Contribution Mario is helping me with the development of the model for measuring asymmetries in consumer demand. We jointly author publications (in progress). He has made 2 research visits to London. I have made two research visits to Bologna University. The collaboration is extended now with a postdoc working with Mario (Sara Capacci)
Impact Presentation at Schumpeter School Award (June 2015) (by M. Mazzocchi) Presentation at iHEA Congress in Milan (July 2015) (by L.Cornelsen) Presentation at HESG Meeting in Manchester (January 2016) (by L.Cornelsen) Two academic papers , currently under review with journals; invited seminar at the University of Cornell (April 2017)
Start Year 2014
 
Description Collaboration with Tim Lang at City University 
Organisation City, University of London
Department Centre for Food Policy
Country United Kingdom 
Sector Academic/University 
PI Contribution I wrote a policy brief on health related food and beverage taxes for the Food Research Collaboration. The policy brief was published on 20th of May 2015. I have also attended a Roundtable "Where next on sugar" held at City University on 28th of Oct 2015
Collaborator Contribution Food Research Collaboration provided support during the process of writing the policy brief and also invited a team of experts to advise, consisting of Mike Rayner, Jane Landon, Malcolm Clark and Corinna Hawkes.
Impact - policy brief on health related taxes on foods and beverages (by 01.02.16 it had been downloaded 509 times) - policy brief yielded in 214 citations in the press within the first couple of days (press office report from 22.05.15) - blog entry at LSHTM web blogs (http://blogs.lshtm.ac.uk/news/2015/05/22/government-must-face-mounting-evidence-for-taxes-on-unhealthy-food/#more-4132 ) - policy brief yielded in an invited presentation at the Annual Conference of Chartered Institute for Environmental Health - invitation to participate at the Roundtable meeting on sugar, held by Food Research Collaboration
Start Year 2014
 
Description Evaluation of a levy on soft drinks in a UK restaurant chain 
Organisation London School of Hygiene and Tropical Medicine (LSHTM)
Department Department of Social and Environmental Health Research
Country United Kingdom 
Sector Academic/University 
PI Contribution I contributed by contributing to the design of data analysis, conducted data analysis and helped draft research paper
Collaborator Contribution The collaborators initiated the study, sourced data, planned the design of the studies , contributed to data analysis and interpretation and drafting papers
Impact - project report to funder (NIHR) - conference presentation at Lancet Public Health Conference (DOI: http://dx.doi.org/10.1016/S0140-6736(16)32251-6)
Start Year 2016
 
Description CIEH conference presentation 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact The presentation sparked debate on food taxes. We used an online polling form to ask the audience perceptions on the taxes

A brief report from the talk was written by TiFSiP (Leah Riley Brown (find link))
Year(s) Of Engagement Activity 2015
 
Description Cornell seminar 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Postgraduate students
Results and Impact Presentation of my work to postgraduate students (approx 20 in attendance) at the College of Human Ecology and personal meetings afterwards with several members of staff
Year(s) Of Engagement Activity 2017
URL http://events.cornell.edu/event/hehbad_seminar_laura_cornelsen
 
Description ESRC workshop 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Invited talk at ESRC funded workshop on health information
Year(s) Of Engagement Activity 2018
 
Description Food EPI seminar 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact I was an invited member of the workshop with the aim of developing Food Environment Policy Index. This included round table discussions, exercise on scoring policy strength in the UK and a general discussion
Year(s) Of Engagement Activity 2016
URL http://foodfoundation.org.uk/publications/
 
Description Global Food Security Lab 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Other audiences
Results and Impact Presentation on economic drivers of food choice to GFS lab for early career researchers on healthy and sustainable diets
Year(s) Of Engagement Activity 2018
URL https://www.foodsecurity.ac.uk/news/180105-n-ecr-policy-lab-determinants-food-choice-healthy-sustain...
 
Description Interview for Malnutrition Deeply 
Form Of Engagement Activity A press release, press conference or response to a media enquiry/interview
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact Interview panellist on fiscal policies on sugary drinks
Year(s) Of Engagement Activity 2018
URL https://www.newsdeeply.com/malnutrition/articles/2018/01/26/taxing-the-world-out-of-obesity
 
Description Invited seminar at the University of Sheffield 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Postgraduate students
Results and Impact ~60 people attended the seminar
Year(s) Of Engagement Activity 2018
 
Description JO press release 
Form Of Engagement Activity A press release, press conference or response to a media enquiry/interview
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact Press release for the paper looking at the impact of voluntary levy on sugary drinks in Jamie Oliver restaurants. Received coverage in >400 media outlets in the UK and >60 in the US, including by the CNN.
Year(s) Of Engagement Activity 2017
URL http://www.bmj.com/company/newsroom/ten-pence-restaurant-chain-levy-on-sugary-drinks-linked-to-fall-...
 
Description Nature podcast 
Form Of Engagement Activity A broadcast e.g. TV/radio/film/podcast (other than news/press)
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact I gave an interview on implementation of taxes on foods and beverages to combat obesity as well as environmental problems
Year(s) Of Engagement Activity 2016
URL http://www.nature.com/nature/podcast/index-2016-11-10.html
 
Description Policy Lab Sustainable Nutrition 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact I was selected to participate at a Policy Lab for Early Career Researchers on Sustainable Nutrition, organised by Global Food Security Programme
Year(s) Of Engagement Activity 2016
 
Description SSB/alcohol press release 
Form Of Engagement Activity A press release, press conference or response to a media enquiry/interview
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact Press release (by the BMJ group to support the paper studying the effects of increasing price of sugary drinks on alcohol purchases)
Year(s) Of Engagement Activity 2018
URL http://www.bmj.com/company/newsroom/sugar-tax-on-soft-drinks-might-drive-up-alcohol-consumption/
 
Description energy drinks 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Blog piece (The rise of soft drinks-sugar is not the only concern, co-authored with Diana Quirmbach and Richard Smith) in response to Food Research Collaboration policy brief on Energy Drinks consumption in the UK (http://foodresearch.org.uk/wp-content/uploads/2016/07/Energy-drinks-final-19-July-2016.pdf)
Year(s) Of Engagement Activity 2016
URL http://blogs.bmj.com/bmj/2016/08/05/the-rise-of-soft-drinks-sugar-is-not-the-only-concern/
 
Description iHEA Milan 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Organised conference sessions (x2) and presented at the International Health Economics Association Congress De Gustibus Diputandum Non Est! Health Economics and Nutrition. Sessions:
(Lead Session) Food prices, food availability and nutrition
(Planned Session): Modelling the impact of food-price based policies on food purchasing behaviour using household level scanner data
(Presenter): Impact of food taxes vs subsidies: are price elasticities symmetric to price increases and decreases?
Year(s) Of Engagement Activity 2015
 
Description invited seminar at Reading 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach Local
Primary Audience Postgraduate students
Results and Impact Invited lunchtime departmental (dep. of Agriculture) seminar at the University of Reading where I presented work on the discrete choice experiments.
Year(s) Of Engagement Activity 2018