The Economics of Food Consumption, Caloric Intake, and Obesity

‘Fat taxes‘ are often proposed to combat obesity. Indeed, economics suggests that an increase in the price of a specific food item leads to a decrease in its demand. However, the effect on total calorie consumption and so obesity is less clear; this will depend on the availability and caloric densities of any substitute foods.

Similarly, an increase in household income will not necessarily increase consumption. The demand for certain foods may rise (e.g. luxury foods) whilst the demand for others may fall (potatoes are the classic example).

In addition, the effect of price and income changes may be different for different household members: for example, some studies find income shocks to negatively affect nutritional outcomes for adults/elderly, but not for children, suggesting that adults give up food to ensure adequate nutrition for their children.

Due to a lack of data however, there has been relatively little research into individuals‘ responses to price and income changes. This study aims to redress this. Using a unique dataset, it aims to quantify how individuals respond to price and income changes, examining short (calorie consumption) and longer term outcomes (obesity) and estimating whether there are differential effects for adults, children and the elderly.

Background
Over past decades, incomes have risen and innovations have changed the relative prices of expending and consuming calories such that food consumption has become cheaper. Despite this, there has been little research estimating the price elasticity of food consumption (caloric intake) and obesity. Similarly, there is little work examining the effects of income (changes) on consumption and obesity.

The main reason for this is the absence of data. Food price data are scarce. If available, they generally cover very large geographical areas, are only observed for a limited number of food items/indices and show little variation across areas. In addition, almost all existing studies use data from one country: the USA. Estimates of income effects are hampered by a lack of individual-level consumption data that can be matched to information on household incomes.

Aims
I will examine the following research questions:

RQ1: What are the food price elasticities of consumption and body size?
RQ2: How do permanent and transitory income shocks affect food consumption and body size?
RQ3: How do food prices and income shocks affect the intra-household allocation of resources,
and does this vary by individual and family-level characteristics?

Individual food consumption is defined by the percent of daily calories from fat and from protein and captures any short-term effects; body size captures the longer-term effect, and is proxied by individual BMI, waist-to-hip ratio, and obesity status.

Methodology
As existing UK/US/European data generally do not include enough information to examine these questions in detail, I will use a very rich, unique dataset on a country that experienced large price variations, many income shocks, and has high obesity rates: Russia.

The Russian data and setting provide a unique opportunity to examine consumers‘ price and income responses for several reasons. First, the data include very detailed community-level prices, linked to individual- and household-level data. Second, the economic reforms caused large price differences, both across and within communities. Third, Russians experienced large income shocks due to the reforms. If consumption and obesity is sensitive to prices and income, their large variation will allow me to detect this.

Scientific/Medical opportunities
This research examines whether changing prices and incomes (e.g. by using tax and subsidy tools) is likely to reduce obesity. It will result in (at least) three academic papers, which will be presented at national and international seminars and conferences, published as working papers and submitted to international high-quality peer-reviewed journals.