Equilibrium Effects of Food Labeling Policies

Changes in food purchases after the Chilean policies on food labelling, marketing, and sales in schools: a before and after study

“…Among foods, this shift resulted in a non-significant change in overall calories purchased. This result is comparable to those of Barahona and colleagues, 23 who also found a pattern of consumers shifting from high-in to not-high in purchases. There was also little net change in purchases from specific food groups, suggesting that consumers shifted (either by choice or because of reformulation) from high-in to not-high-in products within a category rather than changing the type of food or drink they purchased.…”

“…*The only statistically significant pairwise comparison was between college and greater and high school education for high-in calories purchased (p=0•020). tation of phases 2 and 3, with their increasingly strict nutrient thresholds plus an expansion of the marketing regulation to prohibit all television advertising for highin products from 06:00 h and 22:00 h. 22 Our findings are consistent with an analysis of purchase data from Walmart-Chile by Barahona and colleagues, 23 who found an overall decrease in sugar and calorie purchases of 7-9% among Walmart customers over 2 years after the Chilean policy was implemented. 23 Our results are also consistent with a meta-analysis of warning label experiments, 24 which included a study in Canada that examined high-in warnings similar to the Chilean warning 25 and found very similar decreases in overall calories, sugar, and sodium purchased.…”

Optimal sin taxation and market power

“…62 To highlight the consequences of input substitution for optimal sugar taxation we extend our model of firm competition, allowing firms to optimally choose both product prices and sugar contents. We follow Barahona et al (2021) in assuming that firms can deviate from the cost-minimizing sugar content without altering product taste, but doing so raises the marginal cost of production (quadratically in the amount of sugar removed from the product). Under a sugar tax firms therefore trade-off higher production costs against reducing their tax liability.…”

“…In Section 6.3 we consider the effect of a sugar tax when firms reoptimize both price and the sugar content of their products. We model firms' decision over product sugar content following Barahona et al (2021). In their model a sugary product's marginal cost comprises: the cost of the sugar in the product, the cost of a substitute input for sugar, and other components.…”

“…When firms do respond to the tax by reducing product sugar content, the welfare consequences depend on whether larger falls in externalities exceed increased production costs. We consider an extension to our empirical model of firm competition (following Barahona et al (2021)), which allows firms to reformulate their products in response to the sugar tax. We show that for all plausible reformulation costs, firms' privately optimal decisions to reformulate products act to enhance social welfare.…”