Welfare improving distributionally neutral tax reforms

2021

Public Finance Review

Self Cite

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.

“…This is consistent with past intertemporal models that include consumption taxes (see, for example, Mathieu-Bolh 2010).…”

Section: Notessupporting

confidence: 90%

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

2021

Public Finance Review

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“…4. Following Gertler (1997) and Mathieu-Bolh (2010b), I have modified the Yaari (1965)-Blanchard (1985 model to introduce life cycle elements. Gertler (1997) studies the redistributional effects of Social Security between workers and retirees.…”

Section: Discussionmentioning

confidence: 99%

“…À1; the labor income profile is decreasing with age (t À b) to reflect the decrease in income that goes with retirement, like in Blanchard (1985). For some finite values of a h and b h (see the section on Numerical Examples), the labor income profile has a hump shape like in Mathieu-Bolh (2010b). The parameters of the exponential functional forms are also chosen to reflect that the labor income of low-income earners is lower than the labor income of high-income earners.…”

Section: Aggregate Consumptionmentioning

confidence: 99%

Optimal Taxation and Income Mobility with Borrowing Limits

2011

Public Finance Review

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The author studies age-dependent optimal taxation in an environment that takes into consideration changes in consumption behavior over the life cycle due to changes in labor income paths and borrowing limits. Income mobility is defined as an exogenous rate at which individuals change from a low-to a high-income path. In this framework, the role of age-dependent income taxation is reinforced. Consumption and leisure optimal allocations are not constant over the life cycle even when preferences are additively separable. As a result, age-dependent optimal capital income taxation faced by high-income earners differs from zero for all forms of preferences. In addition, past environments used to study optimal taxation appear as special cases of the proposed model. When the rate of income mobility is infinite, the proposed model nests the simple finite horizon framework. When life expectancy is infinite, the model nests the infinite horizon framework.

“…This literature grounded in the work bySmith (1759),Veblen (1899), andDuesenberry (1949), and also includes (but is not limited to) the contributions byAbel (1990), Gali (1994), Ireland (1994,Campbell and Cochrane (1999),Ljungquist and Uhlig (2000),Johanson-Stenman et al (2002),Dupor and Liu (2003),Konrad (2004),Samuelson (2004),Liu and Turnovski (2005), Turnovski and Monteiro (2007), Wendner(2010a, 2010 b), and Alvarez-Cuardo and Van Long (2012. It is also known as the literature on status, conspicuous consumption, or "keeping up with the Jones".…”

mentioning

confidence: 97%

“…See e.g.Yaniv et al (2009), andMathieu-Bolh (2010 and2017).20 Transitional effects of food taxes and subsidies are addressed in another paper.…”

mentioning

confidence: 99%

We are what we eat: Obesity, income, and social comparisons

European Economic Review

Wendner

2020

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The empirical evidence of a non-monotone relation between income and obesity is not well explained.We build a theoretical model combining income inequality and social comparisons to explain the link between income and obesity and study tax policy implications for fighting obesity. We assume that differences in food consumption patterns between poor and wealthy households partly reflect positionality, which is the concern for social status. Our key assumption is that positionality for low-calorie food consumption is positively related to a country's wealth. In this framework, body weight outcomes reflect competing income and positionality effects, yielding the following results. We explain the link between average obesity rates, and standards of living and suggest the existence of a Kuznets curve for obesity.For cross sections of the population, we explain the observed correlation between income and obesity, which is positive in poor countries, and negative rich countries. We find that increasing the relative cost of high-calorie food is less effective at decreasing the relative weight of poor individuals in rich countries than in poor countries.