Equity Impacts of Price Policies to Promote Healthy Behaviours

This article from The Lancet examines the extent to which taxes designed to reduce risky health behaviors in low- and middle-income countries (e.g., those on tobacco, alcohol, and sugar-sweetened beverages) disproportionately impact low-income households. Survey data is used to examine trends in expenditures by household socioeconomic status. Results suggest that price increases have a greater impact on high-income households in terms of absolute expenditures, but make up more of total household consumption for low-income households. Although low-income households are substantially impacted by these policies, the authors discuss how the regressive nature of a tax can be mitigated if its benefits are also disproportionately experienced by those who are most burdened.

In relation to price elasticity (i.e. the expected change in consumption caused by a proposed policy) of tobacco, alcohol, and soft drinks and sugary snacks, low-income countries are found to be as price elastic as higher-income countries, and policies tend to elicit a larger decrease in consumption among low-income groups compared to higher. The use of tax revenues from health taxes can also be used to fund pro-poor programs, which can offset the inequitable distribution of tax burden. Ultimately, the authors conclude that price policies are never unilaterally regressive, but rather the equity effects are often context-specific and must be considered in light of variations in health behaviors and policy environments between and within countries.

This article is fourth in a Lancet series of five papers on NCDs and economics that describes the extent to which socioeconomic factors drive trends in NCDs, and the ways in which NCD control can result in improved economic growth.