Bittersweet: How Prices of Sugar-Rich Foods Contribute to the Diet-Related Disease Epidemic in Mexico (nominated to the Juan Luis Londoño Prize to best paper on social issues by a young researcher)

In response to the growing epidemic of obesity, a number of governments are proposing taxes designed to reduce the consumption of unhealthy foods. I provide the first estimates of the effects of price changes in foods rich... [ view full abstract ]

In response to the growing epidemic of obesity, a number of governments are proposing taxes designed to reduce the consumption of unhealthy foods. I provide the first estimates of the effects of price changes in foods rich in sugar on the prevalence of obesity, diabetes and hypertension. I use rich longitudinal and nationally representative micro data on food prices and objective measures of health outcomes in Mexico from 1996-2010. I employ a unique bar-coded level price dataset with product-specific nutritional information combined with two datasets on health outcomes: (1) a state-level administrative dataset and (2) an individual panel dataset. Exploiting plausibly exogenous within-state variation in prices over time, I show that a decrease in the price of sugar-rich foods significantly increases the prevalence of abdominal obesity, type 2 diabetes, and hypertension. In addition, the least healthy and most impatient individuals seem to be more responsive to price changes, suggesting that time preferences are an important mechanism driving the results. The effect of sugar prices on the incidence of chronic diseases is large. Since the signing of the NAFTA in 1994, I estimate that the reduction in prices of sugar-rich foods explains 20 percent of the increase in diabetes.