11. Fiscal Policies for Health Promotion and Disease Prevention

Abstract

Governments have had limited success using fiscal policy or market interventions to encourage healthy behavior. A review of outcomes shows that interventions work best when public institutions and credibility are strong, the design of the fiscal instruments is appropriate, and the response of consumers and producers to the price signal is high.

The experience of developing countries in using fiscal policy to achieve health interventions is mixed. For example, leaders in some countries, such as India and Egypt, have tried to avoid political challenges by allowing universal access to food subsidies. However, food programs that are targeted strictly to the poor, such as those in Chile, Jamaica, and Peru, provide much higher income transfers.

Subsidies intended to reduce the incidence of respiratory illnesses among the poor by encouraging the in–home use of cleaner–burning fuels and electricity often fail, benefiting middle– and higher–income families instead. In some cases, poor families lack the necessary infrastructure (for example, proximity to the local power grid) or simply prefer the use of charcoal or other "dirty" fuels.

The widespread use of sales or "sin" taxes to reduce consumption of alcohol or tobacco is commonly used worldwide with some success to discourage behaviors detrimental to health. Such policies must be carefully designed, however, or risk a rise in black market and smuggling activities.

More research is needed to determine how agricultural subsidies and taxes on producers of socially harmful products, such as highly polluting fuels, can be designed to have the most cost–effective outcomes.