Journal Article

The distributional consequences of a fiscal food policy: evidence from the UK

Richard Tiffin and Matthew Salois

in European Review of Agricultural Economics

Volume 42, issue 3, pages 397-417
Published in print July 2015 | ISSN: 0165-1587
Published online June 2014 | e-ISSN: 1464-3618 | DOI: https://dx.doi.org/10.1093/erae/jbu027
The distributional consequences of a fiscal food policy: evidence from the UK

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  • Welfare and Poverty
  • Welfare Economics
  • Economics of Health
  • Microeconomics
  • Taxation, Subsidies, and Revenue

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The literature on fiscal food policies focuses on their effectiveness in altering diets and improving health, while this paper focuses on their welfare costs. A formal welfare economics framework is developed to calculate the combined individualistic and distributional impacts of a tax-subsidy. Distributional characteristics of foods targeted by a tax tend to be concentrated in lower-income households. Further, consumption of fruit and vegetables tends to be concentrated in higher-income households; therefore, a subsidy on such foods increases regressivity. Aggregate welfare changes that result from a fiscal food policy are found to range from an increase of 1.41 per cent to a reduction of 2.06 per cent according to whether a subsidy is included, the degree of inequality aversion, and whether substitution among foods is allowed.

Keywords: distributional characteristic; economic welfare; fat tax; indirect tax reform; obesity; D30; D60; H20; I10; I30

Journal Article.  8344 words. 

Subjects: Welfare and Poverty ; Welfare Economics ; Economics of Health ; Microeconomics ; Taxation, Subsidies, and Revenue

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