ADVERTISING OF JUNK FOODS
Foods that are high in fat, salt or sugar (HFSS)
Corrective taxes have long been used to improve social welfare when consumption imposes costs on others; alcohol, fuel and tobacco consumption are leading examples. The welfare improving properties of these taxes is due to their ability to correct behaviour that generates costs that the individual does not fully take into account when making consumption decisions. The traditional focus has been to reduce the costs that are borne by others ("externalities"), but much of the same logic can be applied to costs that are borne by the individual in the future that the individual does not consider at the time of consumption ("internalities").
Taxes on `bad' nutrients and on foods that lack nutrients are a prominent example of a policy motivated by a desire to reduce the costs that individuals impose on their future selves. For example, there is concern that excess sugar consumption is contributing not only to growing rates of obesity, but also to other diet related diseases, including diabetes, cancers and heart disease, and that excess consumption is particularly detrimental for children. There is also evidence that poor nutrition, particularly early in life, leads to poor later life outcomes. The costs generated by poor nutrition therefore comprise both an external and an internal component: costs to the public healthcare system are borne by society, but the effect on social and economic outcomes are mainly borne by the individual themselves in the future. Both the externalities and internalities of poor nutrition mean that it is seen as a major public health problem that requires government intervention. Most of the public health literature has focuses on how policy should be used to reduce various health or nutrition outcomes (for example, reducing the amount of sugar people eat), without making explicit the nature of the market failure that policy is aiming to correct, and without considering the potential costs that such policies might impose and some individuals (for example those whose consumption does not generate externalities or internalities).
In this work we aim to bring together insights from the optimal tax literature and the public health literature to consider the designed of sin taxes. Optimal tax design involves trading off the welfare gains of reducing externalities or internalities, with the welfare losses due to the reduction in consumer surplus due to the tax. We also use this set-up to make clear how efficiency and equity considerations interact in designing corrective taxes.
SELECTED RESEARCH AND ARTICLES
DUBOIS, P., R. GRIFFITH AND M. O'CONNELL (2018) "THE EFFECTS OF BANNING ADVERTISING IN JUNK FOOD MARKETS" REVIEW OF ECONOMIC STUDIES 1:1, 396 - 436
There are growing calls to restrict advertising of junk foods. Whether such a move will improve diet quality will depend on how advertising shifts consumer demands and how firms respond. We study an important and typical junk food market—the potato chips market. We exploit consumer level exposure to adverts to estimate demand, allowing advertising to potentially shift the weight consumers place on product healthiness, tilt demand curves, have dynamic effects and spillover effects across brands. We simulate the impact of a ban and show that the potential health benefits are partially offset by firms lowering prices and by consumer switching to other junk foods.
GRIFFITH, R., M. O'CONNELL, K. SMITH AND R. STROUD "CHILDREN'S EXPOSURE TO TV ADVERTISING OF FOOD AND DRINK" IFS BRIEFING NOTE, 31 MAY 2019
Since 2007 it has not been permitted to advertise food and drink that is high in fat, salt or sugar during children's television programmes. Evidence from Ofcom suggests that in 2016 children spent 64% of their viewing time watching programmes outside children’s programming. Recent discussion around the possibility of a second wave of the Government’s childhood obesity strategy has included calls from health campaigners and leaders of all the main opposition parties to extend current restrictions on when food and drink products that are high in fat, salt or sugar can be advertised to cover all pre-watershed advertising. In a new briefing note, IFS researchers show that half of the television advertising for food and drink that children saw in 2015 was for products that are high in fat, sugar or salt or for restaurants and bars (the majority of which are fast food outlets), and that a large portion of this advertising takes place prior to the watershed.
GRIFFITH, RACHEL, MARTIN O'CONNELL, KATE SMITH AND REBECCA STROUD (2019) "THE POTENTIAL IMPACTS OF BANNING TELEVISION ADVERTISING OF HFSS FOOD AND DRINK BEFORE THE WATERSHED" IFS REPORT
Advertising of high fat, salt or sugar (HFSS) food and drink during children’s television programmes has been banned in the UK since 2007. The Government has recently announced that they will consult on further advertising restrictions for products high in fat, salt and sugar on TV.
The effects of further restrictions on health outcomes will depend on a number of factors: how exposure to advertising is affected, how firms respond in terms of prices, reformulation and other behaviours, how these changes affect the purchase and consumption decisions that households and individuals make, how all of this varies across individuals and how reductions in consumption affects health outcomes.
In this report we discuss the potential effects of banning all advertising of HFSS food and drink before the watershed and how this will depend on each of the channels mentioned above, highlighting where there is uncertainty about the magnitude of the effects.
GRIFFITH, R., M. KROL AND K. SMITH (2018) "WHY DO RETAILERS ADVERTISE STORE BRANDS DIFFERENTLY ACROSS PRODUCT CATEGORIES?" JOURNAL OF INDUSTRIAL ECONOMICS, 66 (3), SEPTEMBER 2018, 519-569
We review the evidence on the effects of soft drink taxes, with a focus on its relevance to the UK context. As of August 2019, 50 jurisdictions levied taxes on soft drinks, many of which have been implemented in the past couple of years. The majority of taxes on soft drinks apply to drinks containing added sugar. Such taxes aim to reduce sugar consumption by increasing the price of sugary drinks, which is likely to lead to a reduction in purchases and a commensurate reduction in consumption. A tax may also lead to reductions in sugar consumption through other channels; for example, due to product reformulation to lower sugar content, or by conveying information about the health costs of sugar consumption. The strength of these effects depends on how the tax is structured, as well as how people and firms respond to the tax.