What Happens to Diet Quality When Food Prices Rise? Revealed Preference From National Household Scanner Data, 2015–2018

ABSTRACT How food prices affect diet quality is an important question to design policies that can improve the nutrition and health of all Americans. This study investigates the association between food‐at‐home diet quality and aggregate food prices to understand if price movements compromise nutrition, and where price‐based policies could be an effective tool to improve population health. Using detailed household purchase data from 2015 to 2018, our findings suggest three insights. First, consumers make substitutions that largely preserve their given level of diet quality, though that level remains poor relative to recommendations for health. Second, we find minimal evidence of heterogeneous responsiveness to prices by diet quality or sociodemographic characteristics. Third, we find evidence that the substitutions consumers make in their protein choices when prices rise increase the healthfulness of their food baskets. Taken together, our study suggests that encouraging healthier diets probably requires more than pricing policies but that price‐based policies targeted at protein may be more effective than other food groups. That we fail to find evidence of differential responsiveness of diet quality to prices suggests that universal (untargeted) policies can be recommended to improve diets across the population. JEL Classification: D12, I12, Q18