Mandatory labeling vs. the fat tax: an empirical evaluation of fat policies in the French fromage blanc and yogurt market.

Summary The taxation of unhealthy food products and the mandatory labeling of key nutrients may help to curve the growth of obesity and related metabolic risk factors. This paper is the first to propose ex ante evaluations of these policy options. To this end, we study the French market for fromages blanc and dessert yogurts, which is characterized by an exogenous variation in legal labeling requirements across products. This is used to identify separately the consumer preferences for fat-content labels and for fat in a structural demand model that is estimated from household scanner panel data. The estimated demand functions are then combined with a structural supply model to evaluate the impact of fat policies on several market outcomes. An ad-valorem tax of 10% on the producer price of full-fat products is shown to result in a 9% fall in fat purchases, whereas the mandatory labeling of fat content produces a 1.5% decrease only. This is explained by the producer price responses, which neutralize up to 96% of the impact of mandatory labeling on consumer demand.