TAXING SWEETS: SWEETENER INPUT TAX OR FINAL CONSUMPTION TAX?

Policymakers are considering various policies to reduce obesity and its associated costs, including consumption taxes on high‐calorie foods and specifically sweetened foods. We investigate two tax policies to reduce added sweetener consumption: a consumption tax on sweetened goods and a sweetener input tax. Both tax instruments can reach the same policy target of reducing added sweetener consumption and are found to be regressive. The tax on sweetener inputs targets sweeteners directly and leads to a loss in consumer surplus that is only one‐fifth of that caused by the final consumption tax. Previous analyses have overlooked this important point. (JEL I18, Q18)     

Border tax adjustments and tariff‐tax reforms with consumption pollution

We develop a model of a small open economy, where pollution per unit of consumption between domestically produced and imported quantities of the same good differs. We show that the first‐best policy combination calls for consumption taxes on all polluting goods, and border tax adjustment (BTA) measures, that is, tariffs or import subsidies. We identify conditions under which well‐known tariff‐tax reform policies for developing economies, such as a consumer‐price‐neutral piecemeal reform of trade and a consumption tax, and a consumer‐price‐neutral reform of all trade and consumption taxes improve welfare. We also evaluate whether reforms of trade taxes alone are superior to consumer‐price‐neutral reforms of trade and consumption taxes.     

Consumer climate data in macroeconomic consumption functions

Zusammenfassung Die vorliegende Arbeit untersucht die Brauchbarkeit der IFES-Konsumentenbefragung für die Analyse des Konsumverhaltens in Österreich. Zu diesem Zweck wird geprüft, inwieweit die Verwendung von Daten aus Konsumentenbefragungen den Erklärungswert von Konsumfunktionen (für dauerhafte Konsumgüter) erhöhen können. Nach einer kritischen Würdigung der bisherigen Literatur zu diesem Thema werden sowohl in bekannten als auch in eigens dafür entwickelten Konsumfunktionen zusätzlich zu den üblichen erklärenden Variablen auch Variable miteinbezogen, die die Stimmung der Konsumenten widerspiegeln. Dadurch verbessern sich die Determinationskoeffizienten und die Standardfehler jedoch nur leicht. Stärker sind die Auswirkungen auf die zu schätzenden Parameter. Durch Berücksichtigung des Konsumklimas nehmen die Preis- und Einkommenselastizitäten plausiblere Werte an. Teilweise wird dadurch auch die Bedeutung des konstanten Gliedes und die Autokorrelation in den Residuen der Gleichungen verringert. Die Konsumklimavariablen dürften in den Konsumfunktionen die Rolle von Smart-dummy-Variablen spielen, die nicht nur die (aufgrund mehrfacher Änderungen der Mehrwertsteuersätze) häufigen Änderungen im Konsumentenverhalten signalisieren, sondern auch Verschiebungen in den Konsumentenpräferenzen widerspiegeln. Durch die Umwandlung qualitativer Aussagen (Konsumklimadaten) in quantitative wurde es möglich, Preissteigerungen in erwartete und unerwartete aufzuspalten und damit den Zinssatz theoriegerechter zu deflationieren. Erstmals ist es gelungen, die Keynessche Vermutung über die funktionale Abhängigkeit der Konsumneigung von psychologischen Faktoren mittels der Berücksichtigung von Konsumklimadaten in Konsumfunktionen zu bestätigen.

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List of variables (quarterly data) AN purchases of consumer goods: next year - AN _W share of those who want to buy less next year - CD consumer durables in real terms - D1 dummy for anticipation purchases - D2 dummy for purchase restraint; both (D1 andD2) caused by VAT changes - FIN financial situation of the own household: next year - FIN _B share of those who expect a better financial situation for the next year - GIG weighted Composite Leading Indicator 10, not trend and amplitude adjusted - GIU unweighted Composite Leading Indicator 10, not trend and amplitude adjusted - LD1 dummy for anticipation purchases 1977 - LD2 dummy for purchase restraint 1978; both (LD1 andLD2) due to luxury VAT increase in 1978 - LDX dummy for anticipation purchases, due to general VAT increases - PC actual deflator of private consumption - PCD relative price of consumer durables, standardized byYP - PCE expected deflator of private consumption - PCUE unexpected deflator of private consumption - PDH actual deflator of consumer durables - PDHE expected deflator of consumer durables - PDHR relative price of consumer durables - PDHUE unexpected deflator of consumer durables - RKEC real long-term interest rate (deflator of private consumption) - RKED real long-term interest rate (deflator of consumer durables) - RKEE expected long-term interest rate - Y disposable income in real terms - YP permanent real disposable income - YT transitory real disposable income     

Experiments on lotteries for shrouded and bundled goods: Investigating the economics of fukubukuro

Fukubukuro (or lucky bag) is a familiar institution in Japan and elsewhere in which the exact contents of a New Year sales item are hidden from the consumer before purchase. Motivated by the fukubukuro example and the lack of evidence on risk attitudes in lotteries involving goods, we conduct a laboratory experiment in which the outcomes are bundled or unbundled goods. The implied gains to a monopoly seller for marketing goods in lottery form rather than separately are only clearly positive for lotteries where there is a higher probability of obtaining the more highly valued good.     

Broke,Ill, and Obese: Is There an Effect of Household Debt on Health?

We analyze the association between household indebtedness and different health outcomes using data from the German Socio‐Economic Panel from 1999 to 2009. We control for unobserved heterogeneity by applying fixed‐effects methods and furthermore use a subsample of constantly employed individuals plus lagged debt variables to reduce problems of reverse causality. We apply different measures of household indebtedness, such as the percentage shares of household income spent on consumer credit and home loan repayments (which indicate the severity of household indebtedness) and a binary variable of relative overindebtedness (which indicates a precarious debt situation). We find all debt measures to be strongly correlated with health satisfaction, mental health, and obesity. This relationship vanishes for obesity after controlling for unobserved heterogeneity while it stays significant with respect to worse physical and mental health.     

The Stability of Price Dispersion under Seller and Consumer Learning*

In many markets, it is possible to find rival sellers charging different prices for the same good. Earlier research has attempted to explain this phenomenon by demonstrating the existence of dispersed price equilibria when consumers must make use of costly search to discover prices. We ask whether such equilibria can be learned when sellers adjust prices adaptively in response to current market conditions. With consumer behavior fixed, convergence to a dispersed price equilibrium is possible in some cases. However, once consumer learning is introduced, the monopoly outcome first found by Diamond (Journal of Economic Theory3 (1971), 156–68) is the only stable equilibrium.     

Stationarity without degeneracy in a model of commodity money

We develop a model of macroeconomic heterogeneity inspired by the Kiyotaki–Wright (J Polit Econ 97:924–954, 1989) formulation of commodity money, with the addition of linear utility and idiosyncratic shocks to savings. We consider two environments. In the benchmark case, the consumer in a meeting is chosen randomly. In the auctions case, the individual holding more money can be selected to be the consumer. We show that in both environments socially optimal trading decisions (that are individually acceptable) are stationary and solve a tractable static optimization problem. Savings decisions in the benchmark case are remarkably invariant to mean-preserving changes in the distribution of shocks. This result is overturned in the auctions case.     

外部性与重工业优先发展

In the framework of a dynamic general equilibrium model, this paper studies how vertical externalities affect the development of heavy industry in a developing economy. The model is comprised of an intermediate and a consumer product sector. The production of both types of goods has pecuniary externalities as they are featured by increasing return to scale. However, the production of an intermediate product has an additional advantage to have externalities through its technological linkage with the production of consumer goods. This is related to the nature of the roundabout production of consumer goods: a larger number of intermediate products lead to higher productivity in the production of consumer goods than do more inputs of a fixed number of intermediate products. Therefore, private investment in the intermediate sector is below the social optimal level. Government subsidies can restore the economy to the social optimum, but they become less needed as the consumer sector grows larger and the advantage of the intermediate good sector diminishes. __________ Translated from Nankai Jingji Yanjiu 南开经济研究 (Nankai Economic Studies), 2007, (2): 3–19     

A new angle for glp-1 receptor agonist: the medical economics argument

Abstract

Glucagon-like peptide-1 receptor agonists (GLP-1 RA) are relatively new medications for diabetes that offer a weight-loss profile that can be considered desirable for patients with both type 2 diabetes (T2D) and obesity. GLP-1 RA are effective in combination with insulin, and even slightly superior or at least equal to short-acting insulin in T2D; however, since they work in the incretin system, they may not be effective in long-standing disease. Additionally, only recently have publications reported their cardiovascular safety, and there is limited evidence for long-term effectiveness. The work presented by Huetson et al. offers a much needed perspective through a medical economic model for the long term cost-effectiveness of GLP-1 RA. The authors found benefits in quality-adjusted life years and reduced lifetime healthcare costs. While there are a few limitations, this study contributes to the understanding of these agents and their impact on the epidemics of obesity in T2D, where weight management is no longer an option, but an essential component of the diabetes plan of care.     

Facilitating Consumer Learning in Insurance Markets: What Are the Welfare Effects?

We model a monopoly insurance market in which consumers can learn their accident risks at a cost c . We then examine the welfare effects of a policy that reduces c . If c is sufficiently small (c  < c ^*), the optimal contract is such that the consumer gathers information. For c  < c ^*, both the insurer and the consumer benefit from a policy that reduces c further. For c   >  c ^*, marginally reducing c hurts the insurer and weakly benefits the consumer. Finally, a reduction in c that is successful, meaning that the consumer gathers information after the reduction but not before it, can hurt both parties.     

IMPROVING THE ANALYTICAL AND DATA FRAMEWORK OF THE GOVERNMENT SECTOR FOR NATIONAL GOALS ACCOUNTING*

Provision of “market goods” follows the decision rules of traditional microeconomics; pricing and resource allocation for such goods tend towards Pareto optimality. The provision of “collective goods,” by contrast, depends on political (or quasi-political) collective decision processes; beneficiaries often receive a share of collective goods free of charge or well below average or marginal (private or social) costs. No inherent tendency towards optimality may be presumed and separate analysis of collective goods becomes an essential part of national goals accounting. The national-income-accounts (NIA) distinction between personal consumption expenditures (PCE) and government purchases of goods and services corresponds roughly to a division between market goods bought by the consumer and a major category of “collective goods” (i.e. “public goods” provided by government). However, a significant proportion of PCE represents “collective goods” paid for by government, business, or nonprofit organizations and provided on behalf of the consumer, whereas a part of NIA government purchases represents services paid for by the consumer (i.e. “market goods”). This article develops operationally meaningful distinctions among “market goods,”“collective goods,” and “tied aid” (a mixed category with market-good and collective-good characteristics). These distinctions are determined by the nature of the decision processes–rather than by the characteristics of the beneficiary or the supplier. This classification is related to the national income accounts and major discrepancies are pinpointed. The blurring of the distinction among market goods, collective goods and tied aid is found to be most consequential in the NIA treatment of “education” and “medical care” services. NIA data for these two services are restructured for national goals accounting purposes in order to illustrate both the quantitative importance and the empirical feasibility of classifying benefits by their respective decision processes.     

TV advertising spillovers and demand for private labels: the case of carbonated soft drinks

The expansion of private labels, or store brands, has transformed consumer choice sets and competition in retail markets, prompting manufacturers to fight back with renewed pricing and product and promotion strategies to forestall further private label expansion. This article examines the spillover effects of television advertising on brand-level consumer demand for carbonated soft drinks (CSDs), including private labels, using a random coefficients logit model with household purchasing and advertising viewing Nielsen data. As in previous work, we find that although brand spillover effects significantly increase demand for CSD brands in the same company and undermine demand facing other manufacturers’ CSD brands, surprisingly, there are positive spillover effects on the demand for private label brands. This indicates that brand advertising is persuasive with respect to manufacturers’ brands but complementary with respect to private labels. Further results show that eliminating television advertising for CSDs would lower aggregate CSD sales as consumers migrate to other beverages, although private labels stand to gain, particularly Wal-Mart brands.     

THE PECULIAR ECONOMICS OF HOUSING BUBBLES

Home values increase rapidly during housing bubbles generating large capital gains. High loan‐to‐value (LTV) mortgages secured by expected future home values are one way to take advantage of these capital gains. In this article, we use a simple partial equilibrium consumer theory model to explore the implications of high LTV borrowing. We find that sufficiently large expected house price growth leads to an upward‐sloping budget line when households can obtain high LTV mortgages. In this environment, the demand for housing fits neither the conventional theories of consumer goods nor that of investment goods. In fact, increases in the expected future price of housing may reduce current housing demand, whereas decreases in the effective (current) price may lead to households buying smaller homes. Moreover, high LTV loans reduce the effectiveness of monetary policy, but raise the volatility of aggregate demand. Tighter borrowing standards may help lower demand volatility at the expense of shrinking the economy. (JEL E21, R21, E52)     

Shaping beliefs in experimental markets for expert services: Guilt aversion and the impact of promises and money-burning options

In a credence goods game with an expert and a consumer, we study experimentally the impact of two devices that are predicted to induce consumer-friendly behavior if the expert has a propensity to feel guilty when he believes that he violates the consumerʼs payoff expectations: (i) an opportunity for the expert to make a non-binding promise; and (ii) an opportunity for the consumer to burn money. In belief-based guilt aversion theory the first opportunity shapes an expertʼs behavior if an appropriate promise is made and if it is expected to be believed by the consumer; by contrast, the second opportunity might change behavior even though this option is never used along the predicted path. Experimental results confirm the behavioral relevance of (i) but fail to confirm (ii).     

Comparative Statics for the Consumer Problem

This paper studies comparative statics in the consumer utlity maximization problem with two goods. The analysis can be global, and it allows for indivisibilities, discrete changes, and non-binding budget constraints. It does not rely either on topological or convexity assumptions. Instead, it uses lattice programming techniques. The conditions derived are superextremal variant properties on the utility function, in appropriately constructed lattices on the consumption set. Sufficient conditions are given for one or both goods to be normal, for one to be inferior, and for some cases of price effects, using what are called value orders and lattices.     

Beyond mobile number portability: measuring consumer preferences for service portability in Japan's mobile phone market

Japan's mobile phone market has been oligopolized by three incumbents who are seeking vertically integrated business models, which may prevent competitors from using platform layers to provide original services. We conduct two types of conjoint analysis to measure consumer stated preferences and draw two main conclusions from the analyses. First, the average consumer is willing to pay more than JPY 2000 (US $20) to increase mobile service portability. Second, the average consumer's willingness to pay corresponds to JPY 100–200 (US $1–2) per song for securing music download platforms. A dilemma exists in consumer preferences for service portability in Japan's mobile phone market, namely the choice between free mobile service portability and convenient music download platforms.     

Where can obesity management policy make the largest impact? Evaluating sub-populations through a microsimulation approach

Background: There is a critical need to focus limited resources on sub-groups of patients with obesity where we expect the largest return on investment. This paper identifies patient sub-groups where an investment may result in larger positive economic and health outcomes.

Methods: The baseline population with obesity was derived from a public survey database and divided into sub-populations defined by demographics and disease status. In 2016, a validated model was used to simulate the incidence of diabetes, absenteeism, and direct medical cost in five care settings. Research findings were derived from the difference in population outcomes with and without weight loss over 15 years. Modeled weight loss scenarios included initial 5% or 12% reduction in body mass index followed by a gradual weight regain. Additional simulations were conducted to show alternative outcomes from different time courses and maintenance scenarios.

Results: Univariate analyses showed that age 45–64, pre-diabetes, female, or obesity class III are independently predictive of larger savings. After considering the correlation between these factors, multivariate analyses projected young females with obesity class I as the optimal sub-group to control obesity-related medical expenditures. In contrast, the population aged 20–35 with obesity class III will yield the best health outcomes. Also, the sub-group aged 45–54 with obesity class I will produce the biggest productivity improvement. Each additional year of weight loss maintained showed increased financial benefits.

Conclusions: This paper studied the heterogeneity between many sub-populations affected by obesity and recommended different priorities for decision-makers in economic, productivity, and health realms.     

Distributing the Benefits from the Commons: A Square-Root Formula

What should be the distribution of the benefits of a fishery (or common-pool resource) where a group of fishers catch fish and sell it to consumers? I propose that, for each person i, where i is a fisher or a consumer, i's returns should be proportional to i's contributions. Unexpectedly, this implies that the fraction of benefits accruing to consumers must be √value of total output of fish/√value of total outputs of fish+√value of total fishers' labor.     

Forecasting Canadian consumption using the Dynamic Generalized Linear Expenditure System (DGLES)

This paper uses the Dynamic Generalized Linear Expenditure System (Dgles) to: 1. study the behaviour of the Canadian consumer; and 2. provide ex postforecasts of consumption expenditures by commodity group. The model is estimated for seven commodity groups (durables, food, fuel, gasoline, other non-durables, semi-durables and services) using quarterly data covering the period 1961.I–1978.IV. The method of estimation is the full information maximum likelihood routine, and the ex postforecasts are provided for the period 1979.I–1981.IV.     

Reconciling psychology with economics: Obesity, behavioral biology, and rational overeating

The modern phenomenon of obesity is an archetypal example of a behavior whose explanation simultaneously falls within the purview of psychology, economics, and the biological sciences. While psychologists and advocates of public health have long viewed overeating as a weakness or disease in need of treatment, economists have pointed out that—like any other consumer behavior—choices about diet and exercise can be viewed from the perspective of rational decision theory, subject to the influence of variation in prices and income but not necessarily as a problem in need of a solution. Recent advances in our understanding of the physiological mechanisms by which genes influence behavior in modern socioeconomic environments have begun to point the way to a resolution to this debate. Drawing inspiration from the scientific literature on the neuroendocrinology of energy homeostasis, this paper reviews the empirical determinants of obesity in light of the biologist’s notion that humans and other animals evolved the ability to store body fat as an optimal response to the presence of starvation risk. This approach yields a powerful theoretical foundation, capturing such features of obesity as dynamic inconsistency, genetic variation, susceptibility to pharmaceutical intervention, and variation by season, socioeconomic status, and degree of financial security. It also provides a framework for reconciling the conflict between behavioral and neoclassical economics.