Understanding Heterogeneity in Price Changes and Firm Responses to a National Unhealthy Food Tax in Mexico

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Citation

Salgado, Juan Carlos & Ng, Shu Wen (2019). Understanding Heterogeneity in Price Changes and Firm Responses to a National Unhealthy Food Tax in Mexico. Food Policy, 89, 101783. PMCID: PMC7266101

Abstract

To address the high prevalence of overweight and obesity in Mexico, an eight percent ad valorem excise tax on non-essential energy-dense foods came into effect on 1 January 2014. This paper estimates price changes after the tax implementation among the top four food categories and by leading vs. non-leading firms using purchase information from over 6000 urban households in the 2012–2015 Nielsen Mexico Consumer Panel. We create product-city-month specific prices that correct for potential biases associated with household and retailer characteristics. Using these corrected prices, we conduct before and after quasi-experimental analyses and find that price increases were larger than eight percent for cookies but were less than eight percent for ready-to-eat cereals, salty snacks, and pre-packaged sweet bread. For the latter food group, event-study analyses on the gradual price change over time suggest that price changes might be the result of an increasing price trend rather than the tax implementation. Firm-level analyses mostly show that price increases by the leading firms were larger than the overall increase at the food market level, helping explain variability in post-tax declines in food purchases as reported in other research. We also find that price changes are generally underestimated when we do not correct prices for biases associated with households and retailers. These results improve our understanding of the mechanisms behind heterogeneous changes in purchases after the tax implementation. Additionally, these results can assist policymakers when designing or improving taxes on non-essential energy-dense foods at a time when these policy options are high on the agenda in many places.

URL

https://doi.org/10.1016/j.foodpol.2019.101783

Reference Type

Journal Article

Year Published

2019

Journal Title

Food Policy

Author(s)

Salgado, Juan Carlos
Ng, Shu Wen

PMCID

PMC7266101

ORCiD

Ng - 0000-0003-0582-110X
Salgado - 0000-0003-2449-866X