How Distorted Food Prices Discourage a Healthy Diet
Public policy making for the prevention of diet-related disease is impeded by a lack of evidence on whether poor diets are a matter of personal responsibility or a choice set narrowed by environmental conditions. An important element of the environment are market imperfections in food retail, which may distort relative food prices and lead to suboptimal dietary choices. To identify such market imperfections, we exploit variation in diets across household that have different levels of income and live in different neighborhoods, using a rich dataset on quantities and prices of food purchases in the U.S. and a structural model of dietary choices. We find that distortions in prices are responsible for one third of the gap between the recommended and actual intake of fruit and vegetables. We construct a feasible fiscal intervention to remedy these distortions that makes all consumers better off.
February 2020 [download pdf]