Difference in Consumer Perception and Price Premium between Organic Food and Health Claimed Food Revealed by Japanese Value-Added Tax Hike

Despite organic food being deemed to include environmental and health attributes, few studies have examined the perception regarding organic food from the scanner panel data. Considering the hike in the value-added tax (VAT) implemented by the Japanese government in April 2014 as a natural experiment, which led to household reviewing spending, the present study examines whether there has been an increase in organic consumption in comparison to consumption of health-claimed food motivated by only good health. The study finds that organic products are less chosen after the VAT increase, while the choice of health-claimed food is likely to remain unchanged after the VAT increase. This finding implies that organic food consumption is not only motivated by healthiness but also by other factors. The results of health-claimed food indicate that a small hike in rates of general tax does not have an impact on healthy food consumption. Reviewing the existing studies to observe whether small rates increase in selective tax for unhealthy food has little influence, and thus, it is likely that a small increase in tax rate does not alter consumer consumption behavior. This study also investigates the price premium of organic and health-claimed food. Price premium for both the types of foods are observed, but the VAT hike raises the price of organic food while lowering the price of health-claimed food