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ABSTRACT:
Regulating specific inputs into health and safety production functions is unlikely to be effective when optimizing consumers can compensate along other margins. This paper examines the implications of this principle in the context of economic policies targeted at reducing obesity. Well-established cross-sectional and time-series correlations between average body weight and eating out have convinced many researchers and policymakers that restaurants are a leading cause of obesity in the United States. But a basic identification problem challenges these conclusions: do more restaurants cause obesity, or do preferences for greater food consumption lead to an increase in restaurant density? To answer this question, we design a natural experiment in which we manipulate the effective price of restaurants and examine the impact on consumers' body mass. We use the presence of Interstate Highways in rural areas as an instrument for the supply of restaurants. The instrument strongly predicts restaurant access, and robustness tests support its validity. The results find no evidence of a causal link between restaurants and obesity, and the estimates are precise enough to rule out any meaningful effect. Analysis of food intake micro data suggests that although consumers eat larger meals at restaurants than at home (even after accounting for selection), they offset these calories at other times of day. We conclude that public health policies targeting restaurants are unlikely to reduce obesity but could negatively affect consumer welfare.

SUGGESTED CITATION:
Michael L. Anderson and David A. Matsa, "Are Restaurants Really Supersizing America?" (December 30, 2007). Department of Agricultural & Resource Economics, UCB. CUDARE Working Paper 1056.
http://repositories.cdlib.org/are_ucb/1056