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Tuesday, June 8th 2021

Ondine Berland (Economie Publique - INRAE) will present "The Effects of Gasoline Prices on Food Purchases: Quantity, Quality and Heterogeneity"

Abstract: 

Carbon taxes can hinder households' welfare as commuting spending is inelastic. When facing increasing gasoline prices, households react by curbing expenditures on non-gas budget items. In this context, food has been shown to be a key adjustment margin. We use household scanner data to examine the effects of gasoline prices on the food purchases of a representative sample of French households. The estimated elasticity of food spending is approximately -0.2 with most of the effect coming from an adjustment in the unit price of goods. An analysis by food categories reveals that households adjust more on fresh products than on processed ones, which may have consequences for nutritional health. When investigating heterogeneity across households characteristics, we find that the demand response of the poorest income category is stronger than that of the rest of the population. Taken together, our findings suggest that households, especially poor ones, curb food expenditures to preserve gasoline consumption when gasoline prices increase, with ambiguous but potentially detrimental effects on nutritional quality.