On the Design of Food Labeling Policies

We study a regulation in Chile that mandates front-of-package warning labels on products whose sugar or calorie concentration exceeds certain thresholds. We document an overall decrease in sugar and calorie intake of 7-9%. To unpack the underlying mechanisms, we provide descriptive evidence of the impact of the policy on consumer choice both across and within categories and firms’ behavior. We find no noticeable substitution of products across food categories and show that most of the demand effect of the regulation comes from within category substitution. In addition, we find that a substantive portion of the overall effect comes from product reformulation. We discuss how these findings can inform the design of effective labeling policies