Abstract
The idea that farm subsidies contribute significantly to obesity and that reducing these subsidies would go a long way toward solving the problem has been popular among the mainstream media and in policy circles. However, economists who have evaluated the issue have consistently found that farm subsidies have had negligible impacts on US obesity patterns. If anything, farm income support policies, including various subsidies and price supports, have made fattening food more expensive and reduced US obesity. New evidence from our updated economic simulation model reinforces that view and the conclusion that reformulation of farm subsidies would be ineffective and even counterproductive as a way of fighting US obesity.
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Notes
- 1.
The distinguished professor of nutrition and economics, Barry Popkin (2009, 2011) makes arguments like Pollan’s but taking a longer view of the role of government in promoting particular patterns of farm production and food consumption through a broader range of policies, including agricultural R&D, which we discuss in Chapter 8. See, also, Popkin and Kenan (2016).
- 2.
The headline in Time Magazine read “Many Foods Subsidized by the Government are Unhealthy” and the opening paragraph began: “If you want to eat healthy in America, don’t expect government subsidies to help. The most federally subsidized foods are heavily processed, and diets rich in them may be having profound negative effects on health.…” (Oaklander 2016).
- 3.
The CRP provides payments to agricultural producers to take highly erodible and environmentally sensitive land out of production and install resource-conserving practices for 10 or more years. The CRP was first authorized in the 1985 Farm Bill, and is administered by the USDA. The 2014 Farm Bill reauthorized the CRP and reduced the enrollment cap from 32 million acres to 24 million acres by FY2018. Stubbs (2014) provides details.
- 4.
Details of the definitions and measures of aggregate PSEs and CSEs are available for OECD countries from the OECD website (http://www.oecd.org/tad/agricultural-policies/).
- 5.
The data were taken from the OECD website http://www.oecd.org/tad/agricultural-policies/psemanual.htm and the USDA ERS website http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table11.htm.
- 6.
- 7.
- 8.
The USDA ERS publishes data and information on its web page (www.ers.usda.gov) on farm-to-retail price spreads and components of marketing cost for different types of food (http://www.ers.usda.gov/data-products/price-spreads-from-farm-to-consumer.aspx), and for FAFH as well as FAH.
- 9.
As noted by Miller and Coble (2007, p. 101), “Morrison Paul and MacDonald (2003) found that, over the period they examined, 1972–1992, agricultural materials declined as a share of food processor costs, as did the sensitivity of food prices to farm prices. Furthermore, they found a total increase in food processing costs of 4.17% from 1982 to 1992 with essentially no contribution from agricultural materials.”
- 10.
The model is described in detail by Okrent (2010) and in summary form by Okrent and Alston (2012) and by Rickard et al. (2013). Appendix A summarizes the mathematical derivations for the model and the parameters used to characterize the initial market equilibrium in the EDM, which are based on 2007 data.
- 11.
The simulated proportional change in price of an individual food is computed as a weighted average of proportional changes in farm commodity prices, where the weights are the shares of the commodities in the retail cost of the food product.
- 12.
The models by Christiansen et al. (2005) and Hall et al. (2011) suggest that, starting from a steady state with body weight and caloric consumption in equilibrium, a reduction in food consumption resulting in a deficit of 100 kilocalories per day would cause a 7.7 pound decrease in weight over 1 year and a 12.8 pound decrease in steady-state weight. In the computations below we use a multiplier of 12.8 pounds of steady-state body weight per 100 kcal change in daily consumption.
- 13.
Loureiro and Nayga (2005) found a statistically significant, negative effect on obesity rates from increases in the implicit taxation of consumers through farm programs as measured by the CSE.
- 14.
Imputing fundamental causation is even harder. As demonstrated by Anderson and Hayami (1986), for instance, countries that have a comparative disadvantage in food production tend to tax food imports and thus food consumption, especially if they are rich, and other factors that account for obesity (or lack of it), such as custom and culture, and even genetic predisposition for obesity, may be related in some fundamental way to the agroecological and economic factors that determine patterns of comparative advantage.
- 15.
The farm commodities covered in the I-O Accounts, a major source of data used in the simulations, changed between 1992 and 1997; in 1992, cattle and hogs were one category, and in 1997, cattle and hogs were separate categories. Since we look at the elimination of farm commodities in 1992 and 1997, we include nine commodities plus one marketing input in our simulations for Chapter 7. For Chapters 8 and 9, we only consider farm and food policies from the base year of 2007, which has separate categories for cattle and hogs, and therefore we have 10 commodities plus one marketing input in our simulations for those chapters.
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7.7 Appendix A. Data for the Economic Simulation model
7.7 Appendix A. Data for the Economic Simulation model
We use an EDM to characterize the linkages between the commodity markets and retail food markets, and simulate the effects of farm and food policies on food prices and purchasing behavior. We do not repeat the mathematical derivations of the EDM here and refer the interested reader to Okrent (2010), Okrent and Alston (2012), and Rickard et al. (2013). The farm sector produces nine food commodities including oilseeds; food grains; other crops (including sugarcane, sugar beets, and peanuts); vegetables and melons; fruits and tree nuts; meat animals; milk; poultry; and fish. In producing food at retail, these farm commodities are used in conjunction with a composite marketing input that captures all of the labor, capital, energy, and materials inputs used in food processing, packaging, transporting, and retailing.Footnote 15 The 10 retail food products include cereals and bakery products; meat; eggs; dairy; fruits and vegetables; other foods; nonalcoholic beverages; FAFH; and alcoholic beverages. Several data sources are necessary to parameterize the model. Table A7.1 describes the parameters, parameter sources, and assumptions used in the EDM.
The data necessary to characterize the demand-side of the EDM and consumer surplus in the social welfare function include elasticities of demand for food products, consumer budget shares for food products, the total value of food products, and policy-induced changes in prices (i.e., taxes or subsidies). The elasticities of demand are estimated by Okrent and Alston (2011) using annual personal consumption expenditures and Fisher-Ideal price indexes from 1960 to 2009 (US Department of Commerce, Bureau of Economic Analysis 2010). The budget shares are calculated using 2007 personal consumption expenditures (US Department of Commerce-Bureau of Economic Analysis 2010), and the value of production of retail food products is based on the 2007 Input-Output (I-O) accounts (US Department of Commerce, Bureau of Economic Analysis 2014) (Table A7.2).
The percentage changes in quantities of foods consumed are then converted to calories consumed using the 2007–2008 NHANES. We included only individuals who were 18 years or older at age of screening. Our calculations are based on day one of the dietary recall, and we used the day one weights in the NHANES (i.e., WTDRD1) to inflate the sample to the US adult population. The foods consumed by sample respondents in the 2007–2008 NHANES, which are organized into 7000-plus USDA food codes, were assigned to one of nine food groups or water. Foods were first identified as FAH or FAFH by source of food (i.e., DR1FS) and observations with missing food source were deleted. FAH includes foods purchased at stores or by mail order purchase and FAFH includes all other purchases. Because the NHANES is based on consumption rather than purchase quantities some of the USDA food codes are disaggregated into purchases. For example, calories, fat and sugar content of USDA food code “frozen peas and butter” is disaggregated into two foods: fruits and vegetables and other foods.
The food to body weight multiplier, which is used to calculate the changes in body weight in year 1 and in the steady state, and thus changes in health-care expenditures, is based on work by Christiansen et al. (2005). The model by Christiansen et al. (2005) suggests that, starting from a steady state with body weight and caloric consumption in equilibrium, a reduction in food consumption resulting in a deficit of 100 kilocalories per day would cause a 7.7 pound decrease in weight over 1 year and a 12.8 pound decrease in steady-state weight. In the food to body weight multiplier we use 12.8 pounds of steady-state body weight per 100 kcal change in daily consumption. Hence, the multiplier from kilograms of food consumption to pounds of body weight (i.e., ∂B/∂Qn) is calculated as energy per gram of food consumed (i.e., kcal/kg in Table A7.2) times 12.8 pound of body fat tissue per 100 kcal (lbs/kcal).
The data necessary to parameterize the supply-side of the EDM and estimate producer surplus are highlighted in Table A7.3. The elasticities of supply of farm commodities are based on the lower-bound estimates from Chavas and Cox (1995). The figures for the value of production of each of the 10 farm commodities and the composite marketing input are constructed using the 2007 I-O accounts (US Department of Commerce, Bureau of Economic Analysis 2014).
The parameters that connect the farm and retail markets are calculated using the Benchmark I-O Accounts (US Department of Commerce, Bureau of Economic Analysis 2014). Table A7.4 includes data on the farm-retail product shares for 2007 and Table A7.5 includes data on the farm-commodity shares for 2007.
In this chapter we simulate the effects of eliminating farm subsidies using consumer support measures (CSMs) based on consumer tax equivalents (CTEs) to parameterize the policy-induced change in commodity prices paid by consumers (see Table 7.5).
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Alston, J.M., Okrent, A.M. (2017). US Farm Subsidies and Obesity. In: The Effects of Farm and Food Policy on Obesity in the United States. Palgrave Studies in Agricultural Economics and Food Policy. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-47831-3_7
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