How Distorted Food Prices Discourage a Healthy Diet
We use data on purchase quantities and prices of healthy and unhealthy food to show that diets are determined at least partially by the “food environment”. We then estimate a structural model to argue that the effect of the environment is important: Distorted relative prices lead to underconsumption of fruit and vegetables in the amount of around 15%, a third of the gap between the recommended and actual intake. We show that it is possible to remedy these distortions with a policy of taxes and subsidies that makes all consumers better off.
February 2020 [download pdf]