Fiscal measures to promote healthier choices: an economic perspective on price-based interventions

Abstract

Introduction: Non-communicable diseases strongly linked to lifestyle factors create an increasing burden of disease. Fiscal interventions (tax and subsidy) are one approach to improving lifestyles but their effective design might be improved. Economic framework: Conventional economic theory suggests that fiscal interventions are only used to correct prices for externalities (costs or benefits imposed on others). These can be difficult to calculate accurately. Fiscal interventions operate by altering the prices that consumers face. Price increases are predicted to reduce demand and the size of the effect is measured by the price elasticity. Tax changes may not translate directly into price changes, however. Evidence for the effect of taxes, subsidies and prices: There is strong evidence for the effectiveness of taxation in relation to reducing tobacco and alcohol consumption and resulting harms. There has been less evaluation of taxation in relation to other unhealthy behaviours or of subsidies to promote healthy behaviours. Discussion: Fiscal levers have been used as interventions to improve health rather than for market correction. Taking account of behavioural insights may improve the design of fiscal interventions and combining interventions may increase effectiveness. Conclusion: Both types of intervention have a role in improving health but there may be challenges in promoting uptake of healthy behaviours.

Subsidizing risk prevention

“…On one hand, from a descriptive perspective, our results provide new insights into the reasons why different kinds of subsidies have different degrees of effectiveness, as is shown in the literature ((e.g. Ludbrook, 2019 andBruinen de Bruin et al 2020). Moreover, our findings also show why some interventions made by regulators may have less influence on people's behavior than expected, as was, for instance, found in the case of measures taken during the COVID pandemic.…”

“…1 Morevoer, the literature compares different types of subsidies/taxes both from an empirical and from a normative perspective, and finds that there are significant differences in the degree of effectiveness of different instruments (e.g. Ludbrook, 2019 andBruinen de Bruin et al 2020). Possible limitations on the effectiveness of public intervention aimed at affecting people's behavior were also recently identified in the case of COVID pandemic since the actions implemented by governments and regulators to make people adopt behaviours reducing the spread often had small effect (e.g.…”

Market positioning in food industry in response to public health policies

“…Finkelstein et al (2004) present economic rationale in support of various interventions to promote healthy eating. In addition, there is more evidence for the effectiveness of taxes targeting nutrients in promoting healthy dietary behavior (Ludbrook, 2019).…”

Longitudinal study of the effects of price and promotion incentives on purchases of unhealthy foods: evidence for restricting food promotions

“…Price interventions to reduce consumption of unhealthy products have been successfully applied in other areas, such as tobacco and alcohol consumption, but have had less use in relation to healthy diets. 10 The recent introduction of the Soft Drinks Industry Levy by the UK Government is an example of successful innovation in this policy area, achieving a greater reduction in sugar content than achieved through voluntary agreements with the food industry. 11 The levy resulted in reductions in sugar content to avoid the levy and large price increases for products which were not reformulated.…”

“…One way to improve the quality of diets and address obesity is to inform the design of policy instruments by observing and understanding household purchasing behaviour for HFSS foods. Price interventions to reduce consumption of unhealthy products have been successfully applied in other areas, such as tobacco and alcohol consumption, but have had less use in relation to healthy diets 10. The recent introduction of the Soft Drinks Industry Levy by the UK Government is an example of successful innovation in this policy area, achieving a greater reduction in sugar content than achieved through voluntary agreements with the food industry 11.…”