Equity impacts of price policies to promote healthy behaviours

Abstract

Governments can use fiscal policies to regulate the prices and consumption of potentially unhealthy products. However, policies aimed at reducing consumption by increasing prices, for example by taxation, might impose an unfair financial burden on low-income households. We used data from household expenditure surveys to estimate patterns of expenditure on potentially unhealthy products by socioeconomic status, with a primary focus on low-income and middle-income countries. Price policies affect the consumption and expenditure of a larger number of high-income households than low-income households, and any resulting price increases tend to be financed disproportionately by high-income households. As a share of all household consumption, however, price increases are often a larger financial burden for low-income households than for high-income households, most consistently in the case of tobacco, depending on how much consumption decreases in response to increased prices. Large health benefits often accrue to individual low-income consumers because of their strong response to price changes. The potentially larger financial burden on low-income households created by taxation could be mitigated by a pro-poor use of the generated tax revenues.

Figure 1.

Socioeconomic disparities in prevalence of consumption and household expenditure on four product categories. Notes: 1. Ratio of household expenditure on the specified product category in high SES group(top wealth quintile) over expenditure in low SES group (bottom quintile) among consumers only. 2. Ratio of prevalence of consumption in high SES group (top wealth quintile) over prevalence in low SES group (bottom quintile). Ratios are calculated after logarithmic transformation of prevalence and expenditure values. Ratios above zero indicate larger prevalence or expenditure in the top wealth quintile; negative ratios indicate larger prevalence or expenditure in the bottom quintile.

Figure 2.

Tax burden of tobacco and alcohol excises in 3 OECD countries.

Figure 3

[7–10 in draft paper]: Top-to-bottom income or wealth decile ratio (ln) of expenditure on product category as a share of total household expenditure.