Hand-to-mouth Consumption and Calorie Consciousness: Consequences for Junk-food Taxation

Abstract

Junk-food taxes have mixed effects on obesity and junk-food consumption. We build a theoretical model to explain empirical results and better understand how to address the obesity crisis. In our framework, hand-to-mouth consumers make an intertemporal choice between junk-food consumption and weight loss. Their choice depends on calorie consciousness, which is influenced by perceived after-tax relative prices and educational attainment. Thus, a junk-food tax modifies consumers’ intertemporal choice both through their budget constraint and calorie consciousness. As a result, the effect of the tax on body weight reflects competing income, intertemporal substitution, and calorie-consciousness effects. The model explains empirical observations such as the recent rise in obesity and differences in weight outcomes for different income levels. The model explains circumstances under which junk-food taxes can be effective or ineffective to reduce body weight as well as differences in elasticities of high-calorie food consumption for high- and low-income earners.

The elusive link between income and obesity

“…This suggests that junk‐food taxes efficacy could be enhanced with complementary educational interventions focusing on peer‐group effects and norms. Mathieu‐Bolh (2021) finds that educational outcomes and tax salience reinforce calorie consciousness and the effectiveness of junk‐food taxes on low‐income earners. Implementing salient junk‐food taxes could reduce the body weight gap between low and high‐income earners in industrialized countries.…”

“…Mathieu‐Bolh's (2021) bounded rationality model expands the literature on rational eating and contributes to the literature on schooling and health behavior. While the model focuses on explaining the effect of junk‐food taxes, it also provides some insight on the link between income and obesity, and education and obesity.…”

“…Mathieu‐Bolh's (2021) model explains conflicting empirical observations about obesity and income. As individuals with a higher education level face lower psychic cost of processing information, they are more calorie conscious.…”

Economic Stress and Body Weight During the COVID-19 Pandemic

“…Being overweight causes illness including type-2 diabetes, high blood pressure, or breathing problems, and being underweight causes gastrointestinal, endocrine, or neurological illness. For that reason, this argument is commonly introduced as decreasing instantaneous utility (see Dragone & Savorelli, 2012;Mathieu-Bolh, 2021;Mathieu-Bolh & Wendner, 2020;Strulik, 2014). 5.…”

“…t) = Ŵ0 . This problem is a simpler version than the one solved byMathieu-Bolh (2021). In this simpler version, I assume no taxation and perfect calorie consciousness.…”