Department of Agricultural and Resource Economics
The Effects of a Fat Tax on Dairy Products
- Author(s): Chouinard, Hayley H
- Davis, David E.
- LaFrance, Jeffrey T.
- Perloff, Jeffrey M
- et al.
We apply an incomplete demand system to supermarket scanner data to estimate the effects of a fat tax on dairy products for different demographic groups. We find own-price elasticities of demand are relatively inelastic and vary little across groups. A fat tax may be an effective means to raise revenue, but will not result in a significant reduction in fat consumption. The welfare effects associated with a fat tax are large and vary greatly across demographic groups. These fat taxes are regressive in nature, as the elderly and poor suffer greater welfare losses.