November 10, 2016, 11:00–12:15
Room MS 003
In this paper we unify existing theories and empirical evidence on the origins of obesity and examine the effects of fiscal policy on the dynamic evolution of weight. We build a dynamic general equilibrium growth model, with two sectors, one producing food and the other producing a composite consumption good. Weight is a function of rational choice as well as labor allocation between the two sectors. By estimating utility from weight and calibrating the US economy we first show that technological advances in agriculture decrease food prices and increase weight but not necessarily through the static effect of higher food consumption but through the dynamic effect of lower calorie expenditure. This way we explain the persistence in the increase in weight long after the initial price effect on food consumption. Second, we show that reducing capital taxation, initially depresses weight levels through higher food prices; steady state food consumption decreases due to a price substitution effect but weight soars due to lower calorie expenditure. Third, reducing taxation on food increases food consumption and weight levels in equilibrium. Labor reallocation towards the less sedentary sector on one hand and higher income on the other function as contradictory forces.