Taryn Presseau (001147995) - Final Thesis

213 Pages·2017·1.7 MB·English

by  Taryn Presseau

THE ECONOMICS OF HEALTH FOODS AND POLICY ISSUES: IMPACT OF
HEALTH CLAIMS ON DEMAND AND POPULATION HEALTH

TARYN PRESSEAU
Bachelor of Arts, University of Lethbridge, 2015

A Thesis
Submitted to the School of Graduate Studies
of the University of Lethbridge
in Partial Fulfillment of the
Requirements for the Degree

MASTER OF ARTS

Department of Economics
University of Lethbridge
LETHBRIDGE, ALBERTA, CANADA

ã Taryn Presseau, 2017
THE ECONOMICS OF HEALTH FOODS AND POLICY ISSUES: IMPACT OF
HEALTH CLAIMS ON THE DEMAND FOR FOODS AND POPULATION
HEALTH

TARYN PRESSEAU

Date of Defence: November 10, 2017

Stavroula Malla Associate Professor Ph.D.
Supervisor

Kien Tran Professor Ph.D.
Thesis Examination Committee Member

Kurt Klein Professor Ph.D.
Thesis Examination Committee Member

Richard Mueller Professor Ph.D.
Chair, Thesis Examination Committee

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ABSTRACT

Chronic disease accounts for 70% of deaths globally and causes substantial
economic burdens. The largest direct healthcare costs associated with illness in Canada is
due to cardiovascular disease (6.8% of total costs) followed by cancer (2.2%) and diabetes
(1.3%). Research has indicated diet can significantly reduce the risk of many chronic
diseases. Governments use health claims to inform consumers about foods’ health attributes
and encourage healthy diets. This thesis examines the impacts of health claim policy on
food demand and population health in North America. The demand for food is estimated
using a linear-approximate almost ideal demand system. Population health is evaluated
using a health production function. The results indicate health claims decreased unhealthy
food demand between 1.4% and 6.26% and increased healthy food demand between 1.95%
and 8.47%. Diet and health claim policy also positively impact population health. Policy
recommendations to improve current health claim policy are provided.

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Acknowledgements
I would like to express the deepest appreciation first to my supervisor, Dr. Stavroula
Malla, who has given me continual support, encouragement and advice throughout the
course of my graduate degree. I am beyond grateful for her patience, guidance, and constant
belief in me and the significant amount of time she devoted to helping me succeed.
I would also like to express my deepest thanks to my committee member, Dr. Kien
Tran, who encouraged me to apply to the Master program and who has constantly
supported, guided, and mentored me throughout this process. In addition, I would like to
thank my committee member, Dr. Kurt Klein, for his help, advice and time. I am also
grateful for the time, encouragement, and advice of Dr. Richard Mueller, Dr. Kamar Ali,
Dr. Duane Rockerbie, Dr. Alexander Darku, Dr. Pascal Ghazalian, and Jeff Davidson and
the rest of the economics faculty. In addition, a special thanks to Merle Christie for her
support, guidance, and help.
Last, I am so grateful to have the endless love and support of my partner, Greg,
parents, Pat, Allan, Luc, and Barb, brothers, Dan and Kyle, and the rest of my family and
friends. Thank you for always being there for me.

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Table of Contents
LIST OF TABLES ........................................................................................................... vii
LIST OF FIGURES ....................................................................................................... viii
LIST OF ABBREVIATIONS .......................................................................................... ix
CHAPTER 1 ....................................................................................................................... 1
1. Introduction ................................................................................................................ 1
1.1 Thesis Objective ............................................................................................................. 4
1.2 Thesis Contribution ....................................................................................................... 4
1.3 Thesis Outline ................................................................................................................ 5
CHAPTER 2 ....................................................................................................................... 7
2. Background ................................................................................................................ 7
2.1 Burden of Chronic Illness and the Functional Food Industry .................................. 8
2.2 Functional Foods: Definitions and Regulations ........................................................ 11
2.2.1 Canada ...................................................................................................................... 11
2.2.2 United States ............................................................................................................. 18
2.2.3 European Union ....................................................................................................... 22
2.3 Comparison of Regulations ........................................................................................ 26
2.4 Dietary Fats and Fruits and Vegetables .................................................................... 28
2.5 Summary ...................................................................................................................... 31
CHAPTER 3 ..................................................................................................................... 34
3. Literature Review .................................................................................................... 34
3.1 Functional Foods ......................................................................................................... 35
3.1.1 Acceptance and Attitudes .......................................................................................... 35
3.1.2 Willingness-to-Pay .................................................................................................... 49
3.2 The Demand for Food ................................................................................................. 56
3.3 Population Health Studies .......................................................................................... 66
3.4 Summary of Literature Review .................................................................................. 73
CHAPTER 4 ..................................................................................................................... 79
4. Theoretical Model .................................................................................................... 79
4.1 Graphical Analysis: Impacts of Health Claim Policy .............................................. 79
4.2 Demand Analysis ......................................................................................................... 81
4.2.1 Choice of Functional Form ..................................................................................... 81
4.2.2 The Linear Approximate Almost Ideal Demand System ........................................ 83
4.2.3 Elasticities ................................................................................................................. 86
4.2.4 Demand System Specifications ................................................................................ 87
4.2.5 Estimation Methods ................................................................................................. 95
4.2.6 Canadian Data ......................................................................................................... 96
4.2.7 U.S. Data ................................................................................................................... 98
4.3 Population Health Status: A Health Production Function ...................................... 99
4.3.1 Data ......................................................................................................................... 104
4.4 Summary .................................................................................................................... 105
CHAPTER 5 ................................................................................................................... 107
5. Empirical Results ................................................................................................... 107
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5.1 Breusch-Pagan Test of Indepedence ........................................................................ 108
5.2 The Demand for Fats and Oils in Canada .............................................................. 109
5.3 The Demand for Meats in Canada ........................................................................... 116
5.4 The Demand for Fruits and Vegetables in Canada ................................................ 122
5.5 The Demand for Fats in the United States .............................................................. 127
5.6 The Demand for Meat in the United States ............................................................ 133
5.7 Population Health Status .......................................................................................... 138
5.7.1 Male Life Expectancy at Age 65 ............................................................................. 138
5.7.2 Female Life Expectancy at Age 65 .......................................................................... 142
5.8 Summary of Empirical Results ................................................................................ 146
CHAPTER 6 ................................................................................................................... 152
6. Policy Implications ................................................................................................. 152
6.1 Policy Suggestions ...................................................................................................... 155
7. Conclusions ............................................................................................................. 161
7.1 Limitations ................................................................................................................. 166
References ....................................................................................................................... 168
APPENDIX ..................................................................................................................... 188

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LIST OF TABLES

Table 1. Summary of Demand Systems and Related Health Claims ................................. 93

Table 2. Coefficient Estimates - Demand for Fats and Oils in Canada ........................... 112

Table 3. Elasticity Estimates - Fats and Oils in Canada .................................................. 114

Table 4. Coefficient Estimates - Demand for Meats in Canada ...................................... 117

Table 5. Elasticity Estimates - Meats in Canada .............................................................. 120

Table 6. Coefficient Estimates - Demand for Fruits and Vegetables in Canada ............. 124

Table 7. Elasticity Estimates - Fruits and Vegetables in Canada .................................... 126

Table 8. Coefficient Estimates - Demand for Fats in the U.S. ......................................... 129

Table 9. Elasticity Estimates - Fats in the U.S. ................................................................ 132

Table 10. Coefficient Estimates - Demand for Meats in the U.S. ................................... 135

Table 11. Elasticity Estimates - Meats in the U.S. ........................................................... 136

Table 12. Determinants of Male Life Expectancy ........................................................... 141

Table 13. Determinants of Female Life Expectancy at Age 65 ....................................... 143
LIST OF FIGURES

Figure 1. Impact of Health Claim Regulations on Consumption of Healthier Foods ........ 80

Figure 2. Consumption of Fat in Canada, 1974 to 2016 .................................................. 110

Figure 3. Consumption of Meat in Canada, 1979 to 2016 ............................................... 116

Figure 4. Consumption of Fruits and Vegetables in Canada, 1985 to 2016 .................... 122

Figure 5. Per Capita Consumption of Fats in the U.S., 1984 to 2010 .............................. 128

Figure 6. Consumption of Meats in the U.S., 1970 to 2016 ............................................ 134

Figure 7. Impacts of a Tax Credit in the Functional Food Market .................................. 157

Figure 8. Health Claims and Subsidies on Functional Food Consumption ..................... 158

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LIST OF ABBREVIATIONS

AAFC Agriculture and Agri-Food Canada
AIDS Almost Ideal Demand System
BP Breusch-Pagan
CDC Centers for Disease Control and Prevention
CFIA Canadian Food Inspection Agency
CHD Coronary Heart Diseases
CLA Conjugated Linoleic Acid
CVD Cardiovascular Disease
DSHEA Dietary Supplement Health and Education Act
EC European Commission
E.U. European Union
EUFIC European Food Information Council
EFSA European Food Safety Authority
FDA Food and Drug Administration
FDAMA Food and Drug Administration Modernization Act
FGLS Feasible Generalized Least Squares
FOP Front-of-Package
GM Genetically Modified
IAIDS Inverse Almost Ideal Demand System
IFIC International Food Information Council
ITSUR Iterative Seemingly Unrelated Regressions
LA/AIDS Linear Approximate Almost Ideal Demand System
MPB Marginal Private Benefit
MSB Marginal Social Benefit
MSC Marginal Social Cost
NCD Non-Communicable Diseases
NFT Nutrition Facts Table
NHP Natural Health Products
NLEA Nutrition Labeling and Education Act
OECD Organization for Economic Development and Cooperation
QUAIDS Quadratic Almost Ideal Demand System
SSA Significant Scientific Agreement
SUR Seemingly Unrelated Regressions
U.S. United States
WHO World Health Organization
WTP Willingness-to-Pay

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CHAPTER 1
1.   Introduction
Chronic illness is a global epidemic that has placed substantial economic and social
burdens on societies around the world (WHO 2017a). In 2015, 70% of deaths globally were
attributed to chronic disease (WHO 2017a). The top four causes of chronic disease deaths
were due to cardiovascular diseases (CVDs), cancers, diabetes, and chronic respiratory
illnesses. CVDs accounted for the largest portion of these causing 45% of chronic disease
mortalities followed by cancer, which accounted for 22% of all chronic disease deaths in
2015 (WHO 2017a). It is now recognized that CVDs, cancer, obesity and diabetes “are
among the most common, costly, and preventable of all health problems” (CDC 2017a,
website). The direct economic costs of chronic illness include wages to healthcare workers,
hospital costs, and pharmaceutical expenditures (Public Health Agency of Canada 2014).
In addition, there are significant indirect and social costs associated with chronic illness,
such as reduced labour market productivity, opportunity costs, a decreased quality of life,
and physical and emotional pain caused by illness.
Research has found that many chronic diseases, such as CVD, some types of cancer,
obesity and diabetes, can be prevented or the risk can be significantly reduced through the
adoption of a healthy lifestyle (Dietz, Douglas and Brownson 2016). Organizations such
as the World Health Organization (WHO), the American Heart Association, and the
Centers for Disease Control and Prevention (CDC) now recommend adopting a healthy diet
as part of a preventative care strategy (WHO 2003; American Heart Association 2017a;
CDC 2017a).
Increased knowledge about the link between diet and health and a desire to improve
well-being has fostered a growing interest from consumers in the adoption of a healthy diet
1