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Abstract

Anticipating the impact of changes in economic incentives on dietary quality and nutritional health requires knowledge of how physical quantities of food consumed respond to price and income variations. A problem arises, however, because physical quantities are: 1- not consistent aggregates in demand models; and 2- not measured at final/retail level in national statistics. The paper develops a solution by establishing explicitly the theoretical link between composite demand and physical quantities, from which a novel empirical approach to the estimation of nutrient elasticities is derived. It is applied to Finnish aggregate data from the National Accounts and Food Balance Sheets over the 1975-2006 period, and the results are used to assess the potential effectiveness of several incentive-based nutritional policy instruments.

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