1. Biing-Hwan Lin Senior Economist, Food Economics Division, USDA/ERS Presentation at 中正大學經濟系 May 12, 2011 Do Taxes and Subsidies Improve Diet and Health? 1

2. Overweight and Obesity Prevalence in the U.S. 1988-94, 1999-2000, 2007-2008 Source: National Health and Nutrition Examination Survey, CDC 2

3. Weight Gains Reflect Energy imbalance We take in more calories than we expand 3

4. Rising Calorie Intakes: 1977 to 2006 Sources: 1977-78 NFCS, 1989-91 and 1994-98 CSFII, USDA; 2003-6 NHANES, CDC 4

5. Trend in Beverage Consumption in the US Sources: 1977-78 NFCS, 1989-91 and 1994-98 CSFII, USDA; 1999-2004 NHANES, CDC. 5

6. Sources of Calories In the US Sources: 1977-78 NFCS, 1989-91 and 1994-98 CSFII, USDA; 2003-6 NHANES, CDC 6

7. Will Eat More Fruits and Vegetables Help? US Average Recommendations (cups) Vegetables2.60 Fruits1.80 Average Daily Intake (cups) [% of recommendation] Vegetables1.58 [61%] Fruits1.03 [57%] Source: 1999-2002 NHANES, CDC Fruits and vegetables are rich in water and fiber, low in energy density Eating more fruits and vegetables promote satiety and decrease energy intake 7

8. New Release: Food Marketing Institute (October 8, 2010) FMI Grocery Shopper Trends 2010: Consumers are Savvy and Informed Bargain Hunters When it Comes to Grocery Shopping 8

9. Pricing policies to improve diet: Two case studies 9 Taxing Caloric Sweetened Beverages (CSB) Subsidizing fruits, vegetables, and milk Approach Estimate food demands to obtain demand elasticities Apply the elasticities to intake data to examine potential effects of pricing policies

10. Taxing Caloric Sweetened Beverages: Potential Effects on Consumption, Calorie Intake, and Obesity. ERS report by Smith, Lin, and Lee, 2010 The Effects of a Sugar-Sweetened Beverage Tax: Consumption, Calorie Intake, Obesity, and Tax Burden by Income. AAEA 2010 presentation by Lin, Smith, and Lee Measuring Weight Outcomes for Obesity Intervention Strategies: The Case of a Sugar-Sweetened Beverage Tax. Working paper by Lin, Smith, Lee, and Hall 10

11. Beverage Demand 11 Separation of CSBs and their diet counterparts CSB (sodas, fruit drinks, sports and energy drinks, and powdered mixes) Potential CSB substitutes and complements Diet drinks Milk (skim, low-fat, and whole) 100% fruit/vegetable juices Coffee/teas Bottled water

12. Nielsen National Consumer Panel, 1998-2007 (Purchase data for demand estimation) 12 Household purchases of groceries scanned at home Quantity, expenditure, and demographics CDC National Health and Nutrition Examination Survey, 2003-6 (Consumption data for intake analysis) 24-hr dietary recall Comprehensive physical, including weight and height

13. Beverage Consumption, 2003-6 13 AdultsChildren Low-incomeHigh-incomeLow-incomeHigh-income Beverages: --------------------------- Calories per day --------------------------- Sugary drinks197136189195 Diet drinks2311 Skim milk613614 Low-fat milk37 6485 Whole milk37167938 Juices38356350 Tea/Coffee20281110 Bottled water0000 Total beverage kcal 337269411394 Source: ERS calculation of 2003-06 National Health and Nutrition Examination Survey (NHANES), first-day intake data.

14. Effect of soda tax on calorie intake and body weight -1.292 -0.591 0.344 0.227 -0.054 0.529 -0.185 1.005 -1.292 -0.591 0.344 0.227 -0.054 0.529 -0.185 1.005 (A) Elasticity High income (A) Elasticity High income (B) Elasticity X 20% tax (B) Elasticity X 20% tax Percent -25.84 -11.82 6.88 4.54 -1.08 10.58 -3.70 20.10 Percent -25.84 -11.82 6.88 4.54 -1.08 10.58 -3.70 20.10 kcal/day -55.8 kcal 0.0 5.5 0.0 11.4 -0.1 0.0 kcal/day -55.8 kcal 0.0 5.5 0.0 11.4 -0.1 0.0 (D) Change in individual daily intake (D) Change in individual daily intake Beverages Sugary drinks Diet drinks Skim milk Low fat milk Whole milk Juices Coffee/tea Bottled water Beverages Sugary drinks Diet drinks Skim milk Low fat milk Whole milk Juices Coffee/tea Bottled water 38.5 kcal/day 38.5 kcal/day -14,053 kcal/yr -14,053 kcal/yr -4.0 lbs/yr -4.0 lbs/yr (E) Reduction in calories and weight (E) Reduction in calories and weight kcal/day 216 kcal 0 122 0 112 2 0 kcal/day 216 kcal 0 122 0 112 2 0 (C) Individual daily intake (C) Individual daily intake Example: A 5’10” man weighing 175 pounds would have a BMI of 25.1—overweight. He drinks a 12 oz. of cola, 8 oz of fruit drink, 8 oz of 2% milk, 8 oz of orange juice, and 8 oz of unsweetened brewed tea. After the tax, other things being equal, the adult male trims off 4.1 pounds and reduces BMI to 24.5—normal weight. 14

15. Estimated Calorie Effects 15 Changes in consumption (kcal/day):AdultsChildren High Income Sugary drinks-35.2-50.3 All beverages-33.3-44.7 Low Income Sugary drinks-37.5-35.8 All beverages-36.8-33.1

16. Estimated Weight Effects: by income 16 Changes in prevalence (%):AdultsChildren High Income Overweight – Before Tax67.630.5 Overweight – After Tax63.424.5 Obesity – Before Tax33.015.0 Obesity – After Tax30.212.0 Low Income Overweight – Before Tax65.134.2 Overweight – After Tax61.129.9 Obesity – Before Tax35.017.8 Obesity – After Tax32.215.4

17. Static rule of 3500 kcal = 1 pound widely applied, but over-estimates weight outcome 3500 calories are based on a fixed body composition—75% fat and 25% lean tissue Body composition varies by age, gender, race/ethnicity, and body weight Weight loss is dynamic because energy requirement depends on many factors, including body weight An initial reduction of energy intake results in weight loss, which in turn reduces the energy requirement and hence weight loss slows down over time. 17

18. Weight loss simulations: static vs. dynamic 18

19. Subsidize purchase of healthy food: fruits, vegetables, and milk 19 ECONOMIC INCENTIVES FOR DIETARY IMPROVEMENT AMONG FOOD STAMP RECIPIENTS Lin, Yen, Dong, and Smallwood. Contemporary Economic Policy, 2010,28(4): 524-36

20. 1999–2002 food intakes, compared with 2005 Dietary Guidelines Food Stamp Recipients Average Recommendations (cups) Vegetables2.37 Fruits1.68 Milk products2.65 Average Daily Intake (cups) [% of recommendation] Vegetables1.26 [53%] Fruits0.89[53%] Milk products1.39 [53%]

21. Data Used 21 USDA National Food Stamp Program Survey 1996-7, which has household food use records (quantity and expenditure) National Health and Nutrition Examination Survey 1999- 2002, which has a 24-h recall of food intake at home and away from home

22. Selected own- and cross-price elasticities 22 MilkVegetablesNon-juice fruits Juice Milk-0.79-0.30-0.120.01 Vegetables-0.02-0.72-0.00-0.02 Non-juice fruits-0.13-0.02-0.810.01 Juice0.010.070.01-1.17

23. Price subsidy 23 Assumptions Price is subsidized by 10% Subsidy applied to food purchased at grocery stores Subsidy applied to fruits, vegetables, and fluid milk as is, not mixtures

24. Quantity Responses to 10% price subsidy (Food stamp Recipients) 24 BeforeRecom’dAfter At home Total At home Total Vegetables (cups) 0.941.262.371.001.33 Fruit (cups) 0.690.891.680.770.97 Dairy (cups) 1.091.392.651.161.45

25. Summary 25 In general, food demand is known to be own-price inelastic for broadly defined food categories First Fundamental Theorem of Taxation: a tax has little effect on inelastic goods As we disaggregate food groups, food demands tend to become more own-price elastic because of the influences of substitutes and complements To simulate the effects of pricing policies on diet and health, it is inappropriate to rely exclusively on the own-price elasticities. Cross-price effects have to be incorporated.

26. 謝謝 26