Session: Obesity & Food
Room: Hollister 306
Time: Tue 10:15-11:45

Presenter: Abigail Okrent (University of California, Davis. Agricultural and Resource Economics)

Discussant: Joanna Parks (University of California, Davis)

Abstract

Many commentators have claimed that farm subsidies have contributed significantly to the “obesity epidemic” by making fattening foods relatively cheap and abundant and, symmetrically, that taxing “unhealthy” commodities or subsidizing “healthy” commodities would contribute to reducing obesity rates. Some recent work by agricultural economists indicates that the effects of agricultural commodity subsidies on food prices and consumption are minimal while other policies like investment in agricultural research and development (R&D) may have had a much more substantial impact on obesity. The goal of this research is to estimate and compare the economic welfare effects including net benefits arising from hypothetical farm commodity and retail food policies as alternative mechanisms for encouraging consumption of healthy food. These policies include increasing government investment in agricultural R&D for particular commodities, providing agricultural subsidies to particular commodities, subsidizing particular retail food products, and subsidizing a particular nutrient in retail food products (i.e., a thin subsidy).
It has been estimated that obese and overweight Americans generate large additional direct and indirect health care expenses that are borne by all individuals, including non-obese and non-overweight individuals. We approximate the total social benefits (losses) that arise from each policy using a conventional welfare measure that includes an additional component that accounts for changes in the indirect and direct healthcare expenditures per BMI unit. First, we characterize the linkage between farm commodity markets, a composite marketing inputs market, retail food markets, and a composite non-food market using an equilibrium displacement model and simulate the likely effects of the commodity and food-nutrient policies on food consumption. Second, we translate the simulated changes in food consumption into changes in weight and BMI status for a representative sample from the National Health and Nutrition Examination Survey. Third, the potential health care savings resulting from the policy-induced changes in BMI are used to parameterize the health-care externality associated with obesity. We compare the estimates of economic consequences from increasing government investment for R&D for particular farm commodities, subsidizing particular farm commodities, subsidizing particular retail food products, and subsidizing the nutrient content of particular retail food products in the United States.

Key Terms

obesity, food subsidies, farm subsidies, externality

Authors:

Abigail Okrent (University of California, Davis. Agricultural and Resource Economics) and Julian Alston (University of California, Davis. Agricultural and Resource Economics)