Three essays on the economics of obesity

Date of Completion

January 2010


Economics, General|Health Sciences, Public Health




This dissertation consists of three essays which analyze different economic aspects related to obesity. The first essay investigates the impact of (i) individual impatience, (ii) large service sector, (iii) credit constraints, and (iv) technological growth on food consumption preferences and individual obesity rates at steady state. Using an overlapping generations (OLG) heterogeneous agents model, we show that lower discount rates lead to higher consumption levels and higher obesity rates in equilibrium. We find that credit availability does not distort food consumption patterns. In the general equilibrium framework that we investigate, with exogenously determined sectoral decomposition, larger service sector is associated with lower obesity rates. Technological growth leads to lower food price and higher consumption levels. These results are empirically verified using non-parametric estimation tools. ^ The second chapter provides insight on the relationship between obesity and happiness. Using the latest available cross sectional data from Germany (GSOEP 2006), UK (BHPS 2005), and Australia (HILDA 2007) we examine whether there is evidence on the impact of overweight on subjective well being. The Hausman test is employed in the univariate and multivariate specifications chosen and reveals evidence for the presence of endogeneity in the German and the Australian data leading to instrumental variable analysis. Results indicate that in all three countries obesity has a negative and significant effect on subjective well being. For Germany, using a differences-in-differences methodology, we find that non-obese individuals are on average 0.5 units happier than their obese counterparts. Our findings also have important implications for the effect of other socio-demographic, economic and individual characteristics on well being. ^ In the third chapter we present an overlapping-generations macroeconomic model that advances an behavioral explanation of the obesity epidemic. Proneness to obesity is viewed as a cognitive miscalculation by economic agents between their expected health state over various consumption bundles and the actual health care they require for their lifestyle choice. This observation builds on the reference-dependent preference framework of Koszegi and Rabin (2006). In our model, like theirs, preferences are decomposed into intrinsic consumption utility and gain-loss utility associated with the miscalculation. Agents in the economy are stratified in their expected health care consumption according to some distribution over the population. Heterogeneity introduced in this way generates consumers of varied proneness to obesity because individuals have various marginal valuations of their miscalculation. In such a population, when all agents pay the same insurance premium, health-conscious agents shoulder the health care costs of their less health-conscious counterparts. Moreover this pricing regime afflicts less health-conscious individuals with grater rates of obesity because they subsidized by the healthier members of society. In a counterfactual analysis we calculate equilibria under an actuarially fair pricing regime. We then compare equilibria under this regime to the risk-pooling uniform pricing standard. ^