Authors: Peter B. Dixon, Maureen T. Rimmer and Daniel Mason-D'Croz
We use USAGE-Food, a modified version of the USAGE model, to simulate the effects on the U.S. economy of reductions in meat consumption brought about by health-related preference changes or induced by taxes. Modifications include: (a) separate identification of Beef processing; (b) estimates of price elasticities of demand for beef and other food products derived from a survey of econometric studies; (c) nesting in the household utility function and in the production functions of food-serving industries to represent substitution between flesh and non-flesh food; and (d) allowance for flows of agricultural land between agricultural activities.
At the macro level, the main influences on our results are health-related effects on medical expenditures and labour supply. The pure food-chain
effects have negligible macroeconomic consequences. Other conclusions are:
1: using beef-tax revenue to subsidize healthy foods strongly accentuates substitution away from beef towards healthy foods. However, the subsidy leads to an overall increase in the consumption of food.
2: using beef-tax revenue to expand public consumption has a negative effect on private consumption. In terms of aggregate demand, the two effects are broadly offsetting.
JEL classification: C68, I19, Q18
Keywords: Reducing U.S. beef consumption; CGE simulations; effects via health expenditures; effects via labour supply
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