What Would We Eat if We Knew More: The Implications of a Large-Scale Change in Nutrition Labeling

Abstract: This paper computes the welfare benefits of additional information about nutritional content in food by revealed preference and evaluates quantitatively whether the estimated behavioral response is consistent with information from experts on the relationship between diet and health. In doing so, it provides estimates of the impact of the law mandating nutrition labeling for all prepackaged foods in the US on nutrient consumption. Estimates derived from a structural model identified based on differential changes in information across foods are consistent with reduced form estimates comparing the change in calorie consumption among label users and non-label users. Taking the estimated willingness to pay for nutrient content as given implies that the labeling law led to an increase in consumer surplus of 25−40 annually for each label user and that additional labeling regulations could generate a comparable benefit. Comparing the implicit value of nutrient information with a benchmark computed from medical evidence and the value of a statistical life (VSL) suggests that consumers are insufficiently responsive to health differences across foods. Taking this benchmark as the normative standard, revealed preference estimates understate the benefits of labeling by a factor of four, and thousands of dollars in additional per capita welfare gains could be realized by policies which would lead consumers to eat healthier foods. This paper computes the welfare benefits of additional information about nutritional content in food by revealed preference and evaluates quantitatively whether the estimated behavioral response is consistent with information from experts on the relationship between diet and health. In doing so, it provides estimates of the impact of the law mandating nutrition labeling for all prepackaged foods in the US on nutrient consumption. Estimates derived from a structural model identified based on differential changes in information across foods are consistent with reduced form estimates comparing the change in calorie consumption among label users and non-label users. Taking the estimated willingness to pay for nutrient content as given implies that the labeling law led to an increase in consumer surplus of 25−40 annually for each label user and that additional labeling regulations could generate a comparable benefit. Comparing the implicit value of nutrient information with a benchmark computed from medical evidence and the value of a statistical life (VSL) suggests that consumers are insufficiently responsive to health differences across foods. Taking this benchmark as the normative standard, revealed preference estimates understate the benefits of labeling by a factor of four, and thousands of dollars in additional per capita welfare gains could be realized by policies which would lead consumers to eat healthier foods. ∗Thanks especially to my advisors Jon Gruber, Michael Greenstone, and Glenn Ellison, and to Karen Li for outstanding research assistance. Thanks also to Hunt Alcott, David Autor, Peter Diamond, Tatyanan Deryugina, Esther Duflo, Amy Finkelstein, Elena Harmon, Jerry Hausman, Panle Jia, Whitney Newey, Amanda Pallais, Michael Powell, Iuliana Pascu, Mar Reguant, Steven Ryan, Ashley Swanson and Joseph Shapiro for helpful comments and suggestions. Thanks also to Mary Brandt and Tomoko Shimikawa for assistance in obtaining data. Funding for this work was provided by NIA grant T32 AG000186-21.