Income, prices, time use and nutrition

Transcription

1 Income, prices, time use and nutrition Rachel Griffith joint work with Melanie Luhrmann, Lars Nesheim, Martin O Connell and Kate Smith Leuven, April / 77

2 Adult obesity has increased Source:WHO 2 / 77

3 Obesity is more common in poorer households, US 3 / 77

4 Obesity has increased across all social classes, UK 4 / 77

5 Child obesity has increased Source:WHO 5 / 77

6 Child obesity is more common in deprived areas, UK 6 / 77

7 Lower income households eat less healthy foods, US Source: Amano (2018) 7 / 77

8 What is the relationship between income, prices, time use and nutrition? Poorer and lower socio-economic households eat fewer healthy foods (fruit and vegetables, whole grains...) have higher prevalence of obesity and other diet-related disease what is the relationship between income and nutrition does low income cause poor nutrition? correlated preference heterogeneity? do poorer households face different prices or different supply conditions? is time use important, and potentially related to work? 8 / 77

9 Food deserts? It is well documented that healthy foods are less likely to be available in stores in lower-income neighbourhoods Campaigners, policy makers and research have interpreted this lack of supply ( food deserts ) as a cause of less healthy eating amongst low income households Several papers fail to find a causal effect (e.g. Handbury, Rahkovsky and Schnell, 2015; Cummins, Flint and Matthews, 2014; Dubowitz et al., 2015; Kozlova, 2016; Allcott, Diamond and Dube, 2017) i.e. changes in local supply has a limited effect 9 / 77

10 A structural analysis of the decline of home-cooked food with Thomas Crossley, Wenchao (Michelle) Jin and Valérie Lechene 10 / 77

11 Motivation There has been a large shift away from home-cooked food towards ready-to-eat food this has been proposed as one of the likely causes of the growth in obesity and decline in the nutritional quality of diets Understanding what has driven this change might help us design better policy it has been associated with changes in prices household structures time use and labour market behaviour of secondary earners 11 / 77

12 Increase in ready-to-eat food, UK 12 / 77

13 Increase in ready-to-eat food, UK 13 / 77

14 Prices of ready-to-eat foods and ingredients 14 / 77

15 Prices of ready-to-eat foods and ingredients 14 / 77

16 Food choices, price, time use and nutrition We model food choices considering time use in food preparation and work home cooked food requires time Households have heterogenous time costs Households differ in size potential economies of scale in food production and consumption 15 / 77

17 16 / 77

18 Model Structural model of food consumption and time use, with home production cost of home cooked food based on shadow price, incorporating opportunity cost of time and returns to scale to food preparation We are interested in choice between home cooked foods (combine time and ingredients) and ready-to-eat foods (requiring little or no preparation time) The model incorporates trade offs: on the consumption side: between purchasing ingredients for cooking or purchasing processed foods on the time use side: between working to earn income, cooking and leisure 17 / 77

19 Model We are particularly interested in the impact of increased labour force participation, hours and real wages of secondary earners this leads to a higher opportunity cost of time for cooking We are also interested in effects of reduction in household size reduced returns to scale 18 / 77

20 Women labour force participation Hours of work of spouses Conditional on participation Average real wages Relative to January Men Women 19 / 77

21 Model overview Households contain two adults, s = 1, 2, and any number of children, n = 2 + K Adults allocate time between market work h s, cooking t s and leisure l s Utility is derived from f, private food good x: (possibly) public, non-food non-durable good l: leisure Food is either purchased ready to eat r or home produced c by combining ingredients i and time t Primary earner s working hours are assumed to be constrained 20 / 77

22 Household utility Unitary model with fixed weights c : home cooked food ( c max : nu c,r,x,l n, r n, x n θ, l ) n r : ready-to-eat food (processed, restaurant, snacks) x : non-food non-durable θ [0, 1] : returns to scale to the non-food good l = l 1 + l 2 : leisure time c and r are not perfect substitutes in preferences 21 / 77

23 Home production of food c : home cooked food i : ingredients [ c i n = min n, Bt ] n γ t = t 1 + t 2 : time spent cooking; B transforms units γ [0, 1] : returns to scale in cooking i and t are complements in home production (Hamermesh, 2008) Technology is linear homogenous in t and i, but not in n a home-cooked meal for two takes less than twice the time required to prepare a meal for one t 1 and t 2 are perfect substitutes in production 22 / 77

24 Budget constraint and time constraints p r r + p i i + p x x = y 0 + w 1 h 1 + w 2 h 2, T h 1 = l 1 + t 1 T = h 2 + t 2 + l 2 r : ready to eat food, i : ingredients, x : outside good market price p r, p i, p x y 0 : unearned income, w j : wage of j = 1, 2 time of j = 1, 2 hj : hours of work, primary earner s hours are constrained h 1 t j : time spent cooking lj : leisure Hours Constraint 23 / 77

25 Leontief assumption The Leontief assumption for home production of food yields: c n = i n = Bt n γ The assumption that the time inputs are perfect substitutes in the production of home cooked food yields that there is one price for the time input t this is the opportunity cost of the secondary earner, the household member who is not constrained on the labour market, w 2 If the constrained individual reallocates time from cooking to leisure, for a given amount of home cooked food, then the unconstrained individual reallocates time to cooking, away from either market work or leisure 24 / 77

26 Model in terms of shadow prices max c,r,x,l nu(c, r, x, l ), s.t p cc + p r r + p xx + p l l = 1 n (y 0 + w 1 h 1 + w 2 T + w 2 (T h 1 )) where p c = p i + w 2 Bn 1 γ p r = p r p x = px n 1 θ c = c n r = r n x = x n θ p l = w 2 l = l n 25 / 77

27 Predictions of the model Shadow price of home cooked food increases with higher market wages for the secondary earner potentially decreases with household size if cooking is more efficient in larger households The effects of an increase in w 2 on the share of ingredients and processed foods are ambiguous, depending e.g. on the relatives sizes of the income and substitution effects 26 / 77

28 Functional form for demand Almost Ideal Demand System: w j = p j q j (p,y,z ) Y = α j (Z ) + β j ln ( ) Y P + i δ ji ln pi + ɛ j where w j is the budget share of good j: home cooked food, processed food, restaurant, take away and snacks, non-food non-durable outside good, leisure time Full income 27 / 77

29 Data UK Family Expenditure Survey (FES/EFS): Repeated cross-section Sample of two adult households where head of household is 25-64, any number of children (including 0) Approx. 200 households per month; after cleaning and selection, about 30,000 observations Detailed information on expenditure on food (367 items) and non-food non-durable good, household composition, demographic information and incomes we map 367 food items to time use Labour supply: participation and hours worked Market prices from ONS Retail Price Index (RPI) 28 / 77

30 Potential and reservation wages We estimate a wage equation controlling for selection estimated at the individual level relating log hourly wage to individual s characteristics sex, age, age squared, marital status, occupation, household type, K, age of youngest kid, net household unearned income y 0, spouse characteristics and year We predict a potential wage and a reservation wage for each individual For participants, the value of time is the potential wage and for non participants, it is the reservation wage 29 / 77

31 Actual and predicted wages 30 / 77

32 Real wage growth 31 / 77

33 Elasticities Income elasticities: home cooked food, processed food and take away and snacks are necessities, and their income elasticities are similar restaurant meals are a luxury food altogether is a necessity, as is usual Own price elasticities are negative and significant for all foods processed food and restaurant the most price elastic, and home cooked food the least price elastic Cross price elasticities mostly make sense Marshallian Elasticities Hicksian Elasticities Engel Curves 32 / 77

34 Shadow price of home cooked food 33 / 77

35 Shadow price of home cooked food 33 / 77

36 Effect of 10% tax on processed food Processed food 34 / 77

37 Effect of 10% tax on processed food Ingredients 35 / 77

38 Effect of 10% tax on processed food Restaurants, take aways and snacks 36 / 77

39 Summary We develop a structural model that can recover observed trends in shares of food types A structural decomposition shows that price movements, demographic changes and labour supply and wages explain together the observed trends A tax on processed foods (at home) leads to substitution to other ready-to-eat foods Preferences or skills in food preparation? 37 / 77

40 Shopping around: how households adjusted food spending over the Great Recession with Martin O Connell and Kate Smith 38 / 77

41 Over the Great Recession households experienced adverse shocks to their incomes and large increases in the price of food unlike previous recessions, expenditure on food failed to keep pace with rising food prices led some to infer a substantial reduction in the size and nutritional quality of households food baskets 39 / 77

42 Fall in non-durable expenditure (UK) food accounts for most of the difference across recessions Start date recession 40 / 77

43 The Guardian

44 However, it is well known that equating expenditure with consumption can lead to mistaken conclusions about how households are affected by changes in their economic environment households may increase their time spent searching for lower prices (Stigler, 1961) or in home production (Becker, 1965) in order to smooth their consumption They may also change the composition of their shopping baskets (i.e. switching from a preferred branded to a cheaper generic product) to maintain the nutritional quality of their food basket 42 / 77

45 A series of papers looked at what happened to food consumption over the Great Recession We are interested in the extent to which households are able to smooth, or insure, the quantity and nutritional quality of their food basket in the face of adverse shocks households spend more time shopping and pay lower prices, Kaplan and Menzio (2014b)) switch to low-price retailers Coibon, Gorodnichenko and Hong, 2014) increase their use of sales, switch to generic products (Nevo and Wong, 2014) We show that in the UK households used these mechanisms and maintained or improved diet quality by substituting time in search and home production 43 / 77

46 This results are in line with earlier literature e.g. Ruhm (2000) Are recessions good for your health? obesity increases when the economy strengthens other papers by Ruhm show that activities that are bad for health, such as drinking, reduce in recessions (increase in booms) due to income effects) Adda, Gaudecker and Banks (2009) The impact of income shocks on health: evidence from cohort data find similar results to Ruhm; income innovations have little effect on a wide range of health measures, but do lead to increases in mortality and risky health behaviour Culter and Lleras-Muney (2010) argue that income (material resources), explains at most 20% of the gradient in health by education 44 / 77

47 UK consumer price of food, Source: ONS 45 / 77

48 An aside, the real price of food at home, Source: OECD 46 / 77

49 Real food expenditure and calories purchased Source: Kantar 47 / 77

50 Changes in the Healthy Eating Index Max Mean in Change to % change to score HEI of which Good change Bad change which consists of: 48 / 77

51 Changes in the Healthy Eating Index Max Mean in Change to % change to score HEI of which Good change Bad change which consists of: Total fruit Whole fruit Total vegetables Dark green/orange veg Total grains Whole grains Milk Meat Oils Sodium Saturated fat Calories from SoFAAS / 77

52 Model Households choose groceries and how much time to allocate to shopping and cooking Spending more time shopping allows households to lower their expenditure on groceries, but they incur a cost of time Similar model to Aguiar and Hurst (2007), but we extend to also consider the choice over the characteristics of their grocery basket characteristics include the nutritional and food group composition of the basket, the share of the basket from branded products, and the time required to prepare calories for consumption we are particularly interested in its nutritional characteristics 50 / 77

53 Price per calorie, P = P(e, z; φ), depends on shopping effort, e more time shopping results in lower prices, P/ e < 0, with diminishing returns to effort, 2 P/ e 2 > 0) but has an opportunity cost, ω Characteristics also affect price We assume that changes in work status affect household s choices through changing the resources that are available to spend on food and the opportunity cost of time, but not through altering the relative desirability of different basket characteristics or the marginal rate of substitution between calories and any given characteristic 51 / 77

54 Cost minimization problem: min P(e, z; φ)c + ω(e + e,z,c z ), s.t. v(c, z) = v. ω: opportunity cost of time (capturing choice over consumption of non-food, leisure and labour supply) v: total resources allocated to food consumption The first order condition for shopping effort is: P e C = ω, i.e. the household puts effort into shopping up to the point where the marginal gain in terms of lower food expenditure equals the opportunity cost of time can be used to recover the household s opportunity cost of time 52 / 77

55 The first order conditions for total calories and characteristic allow us to obtain the marginal rate of substitution between calories and characteristic k: v/ z k v/ C = P C z k P our interest is in how price per calorie changes (within household) through time due both to the household paying lower prices through effort, given basket characteristics, but also due to substitution across the basket s characteristics Framework is well-suited to studying how households adjust their shopping behaviour in response to deteriorations in the economic environment we analyse changes over the Great Recession households in the UK experienced reductions in their real incomes, driven by slow nominal wage growth and reductions in asset prices and faced higher food prices 53 / 77

56 The negative economic shocks experienced over the recession led to a reduction in v, meaning that households were made worse off however, we observe empirically that the number of calories purchased by households and the nutritional quality of these calories remained stable How were households were able to adjust in order to smooth the size and nutritional quality of their shopping baskets Our empirical strategy is to specify a parametric form for the price per calorie function P(e, z; φ) and use this to estimate the sensitivity of the price per calorie that households paid for their grocery baskets to the choice variables (e, z) 54 / 77

57 We assume that the price function, P(e, z; φ), can be approximated by ln P ht = α ln e ht + β ln z ht + γx ht + τ ht + η h + ɛ ht. Pht : price per calorie, weighted average of transaction prices for the individual products in grocery basket τ ht region-time effects ηh household fixed effects x ht time varying household demographics 55 / 77

58 Data Kantar Worldpanel scanner data collected at the household level transaction level, information on all products in the household s shopping basket longitudinal, we observe households on average over 30 months 14,694 households January 2005 June / 77

59 Implied opportunity cost of time 57 / 77

60 Changes in log price paid per calorie; estimates from model All households Change in ln(p ht ) Change in ln(p ht ), no behavior Change in ln(p ht ), due to behavior of which shopping effort nutrient characteristics other characteristics / 77

61 Contribution to change in price paid per calorie Contribution % total reduction Shopping effort: Number of shopping trips Number of chains visited Savings from discounter Savings from sales Total Nutrient characteristics: Other characteristics: Total / 77

62 Contribution to change in price paid per calorie Contribution % total reduction Shopping effort: Nutrient characteristics: Protein Saturated fat Unsaturated fat Sugar Fibre Salt Fruit Vegetables Dairy Cheese and fats Poultry and fish Red meat and nuts Drinks Prepared sweet Prepared savory Alcohol Total Other characteristics: Total / 77

63 Contribution to change in price paid per calorie Contribution % total reduction Shopping effort: Nutrient characteristics: Other characteristics: Share from generic products Share of groceries from big pack sizes Total Total / 77

64 Changes in food at home and food out Real expenditure Change % change Food at home Food out Calories Food at home Food out / 77

65 Summary Over the Great Recession UK households experience depressed real wages, higher unemployment and higher food prices Expenditure on groceries reduced, unlike in previous recessions Diet quality improved Households changed their shopping behaviour in ways that lowered the average per calorie price of their shopping basket Spending more time shopping and substituting across characteristics of the shopping basket (which would have made households worse off), nonetheless allowed them to maintain their calorie purchases while reducing their real food expenditure 63 / 77

66 Gluttony and sloth? Calories, labour market activity and the rise of obesity Rachel Griffith, Rodrigo Lluberas and Melanie Luhrmann 64 / 77

67 Real expenditure on food and drink, UK 65 / 77

68 Real expenditure on food and drink, Equivalised daily % change expenditure (2005 $) All food and drink of which: Food at home Eating out, fast food, soft drinks and confectionery Alcohol / 77

69 Expenditure per 1000 calories, food at home 67 / 77

70 Expenditure and calorie shares by food groups Food at home Eating out Soft drinks and Alcohol and fast food confectionery Expenditure shares change Real expenditure per calories 68 / 77

71 Total calories 69 / 77

72 Summary Calories fell but the strenuousness of work and daily life fell by more leading to rise in obesity work and time use matter for other reasons too The relationship between income, work, time use and nutrition is still not well understood Increasingly good data Combined with economic theory can help us learn how to design better policy Exciting area for research 70 / 77

73 Extra Slides 71 / 77

74 Discussion of the constrained hours assumption Constraining hours of the primary earner implies that the shadow price of ingredients is independent from choices if not, then we need to assume diminishing marginal returns to avoid corner solutions; if CRS production, the model predicts cooking time ratio determined by the wage ratio rather than individual wages Suppose hours are not constrained: having t 1 + t 2 in the production function means that t 1 = 0 if w 1 > w 2 but primary earner does some cooking in the majority of households, so that we would need to assume i = F (t 1, t 2, 2 + K ) Back having l1 + l 2 in the household utility means l 1 = 0 if w 1 > w 2 This is unrealistic. We would need to assume that l 1 and l 2 enter utility separately. With separate leisures in preferences and separate cooking times in F, if we assume F(t 1, t 2, 2 + K ) = ψ(t 1, t 2 )G(2 + K ), the model predicts that t 1 /t 2 is determined by w 1 /w 2, which is rejected by the time use data (Jin (2013)) 72 / 77

75 Full income Back p r r + p i i + p x x + w 2 (l 2 + t 2 ) + w 2 (l 1 + t 1 ) = y 0 + w 1 h 1 + w 2 T + w 2 (T h 1 ) We observe w 1 h 1 + w 2 T + w 2 (T h 1 ) for individuals who work, and we impute a wage for non participants. But we do not observe a reliable measure of y 0. In the FES, unearned income is often negative, and we have no saving or borrowing in this model We measure full income as total weekly expenditure on all items (food plus x) plus the imputed cost of non market time (time spent cooking and for leisure (l + t) = (T h)). 73 / 77

76 Income and price elasticities Back wrt to prices of Good Inc.El. Home fd Proc. Rest. Snacks Non fd Leisure Home fd Proc.fd Restaurant Take away Non-food Leisure Bootstrap standard errors in parenthesis Marshallian price elasticities 74 / 77

77 Income and price elasticities Back wrt to prices of Good Inc.El. Ing. Proc. Rest. Snacks Non food Leisure Home fd Proc.fd Restaurant Take away Non-food Leisure Bootstrap standard errors in parenthesis Hicksian price elasticities 75 / 77

78 Engel curves Back (a) ingredients (b) processed foods (c) restaurants (d) take away and snacks 76 / 77

79 Calories, male by work status (a) Home (b) Out, fast food, etc (c) Alcohol (d) Total 77 / 77