Document Type

Working Paper

Publication Date


Working Paper Number

WP #10040, November 2012 Revised on October 2011; CARD Working Paper 10-WP 518


We extend the existing literature on food taxes targeting obesity. We systematically incorporate the implicit substitution between added sugars and solid fats into a comprehensive food demand system and evaluate the effect of taxes on sugars and fats. The approach conditions how food and obesity taxes affect total calorie intake. The proposed methodology accounts for the ability of consumers to substitute leaner low-fat and low-sugar items for rich food items within the same food group. This substitution is integrated into a calibrated demand system in addition to the substitution among food groups, using recent food intake data and existing demand elasticities. Simulations of taxes on added sugars and solid fat show that their impact on consumption patterns is understated and the induced welfare loss is overstated when abstracting from the substitution possibilities within food groups.

Publication Status

Published in Health Economics, Vol. 22 no. 11 (2013): 1318-1343.

JEL Classification

I18, Q18

File Format



58 pages

File Function

This draft: October 3, 2011 (Original draft: December 2010). Expanded analysis for sugar and solid fat.

Included in

Economics Commons