Censored quantile regression and purchases of ice cream

Abstract

Using Norwegian household data, we estimate the joint effects of increasing the value added tax (VAT) for less healthy food and removing the VAT for healthy food on purchases of ice cream and thereby weight outcomes. We estimate these effects with a censored quantile regression (CQR) model because about half the sample does not purchase ice cream and also because the probability of obesity is greater for heavy ice cream eaters. The CQR model allows for differing responses for high and low-purchasing households. We use an algorithm for the CQR which is simple, robust to a high degree of censoring, and performs well near the censoring point. In response to the VAT changes, we find that high-purchasing households would reduce their annual per capita purchases of ice cream by 1.8 kilograms, which corresponds ceteris paribus to an annual weight reduction of more than half a kilogram of body weight.