Economic Perspectives on Obesity : identifying determinants and evaluating policies

Abstract

This paper reviews the recent economic literature on issues of health and nutrition with a special focus on obesity. Statistics show substantial variation in obesity rates both across countries and along socio-economic lines within countries indicating a need for a greater engagement by social sciences and economics. Various economic models emphasise different aspects of consumer behaviour related to obesity. The neoclassical approach stresses that overweight and obesity can be the outcome of rational decision making as a result of changes in relative prices. Household production theory adds components of education, abilities and time allocation and models of intertemporal choice assume a dynamic perspective. The field of behavioural economics points to deviations from rational behaviour that commonly occur in eating decisions. Potential market failures discussed as rationales for policy interventions are externalities, lack of information, and irrational behaviour. However, the empirical basis for the existence of these market failures is rather weak as is the empirical evidence on effectiveness and efficiency of specific policies such as fat taxes.