Evaluating the impact of fat taxes and vegetables subsidies on specific food categories (630.4)

Abstract

Objective: The objective of this study was to examine the psychological effects of framing a 10% price difference between healthy and relatively less healthy foods as a tax, subsidy, or a combination of both.Methods: In cooperation with a Northeastern grocer, a seven‐month field study was designed in which daily, itemized transactions were tracked for 233 participants. Participants received 10% discount on grocery purchases during the first month of the study. In months two through seven, one‐quarter of the households continued to receive the 10% discount. The other households received a 15% discount on all foods considered healthy, and a 5% discount on all foods considered unhealthy. These households were also assigned to one of three price framing conditions in which the 10% price difference was called either a 10% tax on unhealthy foods, a 10% subsidy on healthy foods, or a 5% tax on unhealthy foods and a 5% subsidy on unhealthy foods. The grocer’s proprietary algorithm was used to determine the health rating of the foods. Before‐after regression methods were utilized to examine the impact of each intervention on expenditures on the following food categories: pre‐made dinners; desserts; dairy; fruit; vegetables.Results: Participants in the subsidy condition spent $3.21 less (p<0.001) on unhealthy dinners while at the same time spending $2.25 more on the fattening desserts (p<0.001) Interestingly, these individuals spent $1.41 more (p<0.001) on fruit, though this fruit was preserved in heavy syrup. Participants in the tax condition responded by spending $4.34 more on higher calorie dairy items. When the price frame included both a tax and subsidy, participants responded by spending $3.39 less on fresh fruits. There was no effect on vegetables.Conclusions: These findings document important psychological discrepancies in relation to the framing of price differences. Policy makers should seriously consider these responses as they design instruments to encourage healthier behaviors.