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Policy Analysis & Management

The Economics of Obesity: New tools for examining a national epidemic

John Cawley, an economist in the Department of Policy Analysis and Management at Cornell University, studies health economics, specically the economics of obesity. His research sheds light on the causes and consequences of obesity and strategies to address it from the unique vantage point of economics.
here is widespread recognition that obesity is a major public health problem. Approximately one-third of all adults and 17 percent of children in the United States are obese and more are overweight (Burkhauser et al., 2009). Cawley has dedicated his career to examining this epidemic from the unique vantage point of economics. Policy makers and community leaders should review the evidence on program effectiveness and costs to avoid policies that wont work or will waste money, Cawley cautions. He argues that government spending should focus on programs that offer the biggest bang for the buck. Economic analysis can facilitate these decisions, providing insights into the causes and consequences of obesity, justification for government interventions, and the cost effectiveness of policies and programs designed to prevent and reduce it. As an economist, Cawley pays close attention to the following concepts: 1) trade-offsfor example, understanding what one has to sacrifice in order to implement a certain program or policy, 2) understanding the causes and consequences of obesity (while it is quite easy to understand factors that are associated with obesity, getting a handle on cause and effect is much harder), and 3) how individuals respond to incentives to change their lifestyles in ways that may affect obesity. Consequences Both adults and children who suffer from obesity

Simply telling people to behave differently may not be very effective; you need to alter the trade-offs people face to create incentives for them
cope with its effects in nearly every area of their lives. Early in his career and before the obesity epidemic was fully recognized, Cawley set about quantifying the consequences of obesity. He has looked at both the direct economic consequences, such as higher medical costs, and the indirect costs, such as job absenteeism. Here are a few highlights from his more recent work. In one study, Cawley (2004) examined the impact of obesity on wages and found that obesity lowers wages, especially for white women. He found that obese workers miss work for health reasons

more often than non-obese workers; obesity-related job absenteeism costs $4.3 billion a year in the United States (Cawley, Rizzo, and Haas, 2007). In other research, he has examined the impact of obesity on children and adolescents. For young boys ages 2 to 3 years old obesity is associated with reduced verbal skills, social skills, and motor skills. Among young girls, obesity is also associated with reduced verbal skills (Cawley and Spiess, 2008). Among teenagers, obese females are more likely to start smoking (Cawley, Markowitz, and Tauras, 2004), and dating is less likely among heavier girls and boys (Cawley, Joyner and Sobal, 2006). Causes Cawley has examined economic explanations for the recent rise in obesity - incentives for people to eat more or burn fewer calories. His recent paper summarizing the economics of childhood obesity (Cawley, 2010) paints a complex picture of the effects of government policies and social conditions. Following are some highlights. Some research indicates that lower food prices account for 41-43% of the rise in young adults body mass index (BMI; a measure of weight-for-height that is a key marker for obesity). The price of fruit and vegetables, on the other hand, has risen 17 percent and some studies have linked this to higher BMI in American children and teens. While the impact of farm policy on food prices is modest, farm polices can have profound impacts on the food system that go beyond pricing. Historically, subsidizing the production of corn and restricting imports of sugar gave food manufactures an incentive to substitute highfructose corn syrup for sugar. High fructose corn syrup has received recent attention due to controversy over its link with obesity. In another example, producers who receive agricultural price supports are required to contribute a specific percentage of their sales to a fund that is used for commodity-specific advertising and research. Among other things, these funds are used to support the advertising of fast-food menu items. Fast food advertising, in turn, has been linked to increased risk of obesity in young people. Others have pointed to maternal employment as a factor in childhood obesity, and indeed studies have found an association, but the effects vary depending on level of employment, income, and age of child. Seeking to better understand the link, Cawley and Liu (2007) looked at how maternal employment affects the mothers allocation

of time to activities that are associated with child diet and physical activity. They found that working mothers spend less time grocery shopping and cooking, and were more likely to purchase prepared foods than mothers who do not work outside the home. They also found working mothers spend less time playing with their children and playing sports with their children. Importantly, these decreases were only partly offset by increases in time spent on these activities by fathers or partners. Resulting changes in family food choices and activities points to a plausible mechanism for the association between maternal employment and childhood obesity. To address the obesity problem, government and private entities are all looking for ways to help people lose weight. An array of interventions has been undertaken. Cawley argues for evaluating these interventions in order to shed light not only on what works, but also on what doesnt. The objective data sometimes contradict popular beliefs. School activity: Does more physical education make a difference? As childhood obesity has risen in the past three decades, health and government officials have suggested requiring students to spend more time in physical education classes. Cawley examined data in 50 states to see how participation in physical education (PE) classes influences obesity among teenagers (Cawley, Meyerhoefer and Newhouse, 2007). To study this, Cawley took advantage of the fact that different states have different PE requirements, ranging from no requirement at all in 12 states to 3.5-4 years of high school PE classes in two states. Cawley used stateto-state variation in these requirements to predict teen physical activity, which he then related to teen obesity. His research found that PE requirements are effective in increasing the amount of time that students are physically active in class. In states that require participation in PE classes, boys had 27 more minutes per week of activity and girls had 37 more minutes per week of activity during class time compared to youth in states with no PE requirements. In addition, girls living in states with PE requirements reported more aerobic activity and strengthtraining outside of class. However, while increased physical activity has a multitude of benefits, the study found no evidence that the physical education requirements lowered the rate of student

overweight or obesity as measured by Body Mass Index (BMI). There are several potential explanations for this ranging from the insensitivity of the BMI measure itself, to the fact that increased physical activity may not be sufficient to counteract other factors which favor unhealthy weight gain. Financial incentives: Does paying people to lose weight work? Much of Cawleys research has focused on investigating what incentives would encourage weight-loss and prevent obesity. Simply telling people to behave differently may not be very effective; you need to alter the trade-offs people face to create incentives for them to do what you want them to do, says Cawley. A recent study examined the effectiveness of offering financial rewards for weight loss at ones workplace. Cawley and his colleagues used data collected from 2,407 employees who participated in a voluntary, year-long health promotion program at 17 worksites nationwide (Cawley and Price, in press). The weight loss programs were run by a health promotion company that advertised the program, offered coaching and weight loss tips, tracked participants weight over the course of the year, and paid the rewards associated with achieving various weight loss goals. Companies that participated in this study chose from among three different incentive strategies for encouraging weight loss. Thirteen worksites offered quarterly rewards for weight loss, giving participants an immediate reward for losing weight. At two worksites, participants paid a monthly fee, which was refunded at the end of the year if they achieved certain weight loss goals. Finally, two worksites served as a control group and offered general health programming with no financial incentives for weight loss. The results were modest and the drop-out rates were high. Those who paid the monthly refundable fees lost an average of 3.6 pounds. Those who received quarterly payments lost an average of 1.4 pounds and those in the control group lost 1.7 pounds. These results indicate that while cash rewards may hold promise, more research is needed to determine the most effective design. Will voters pay for anti-obesity programs? Programs to combat obesity cost money to design and implement, but are taxpayers willing to pay for such programs? The answer is a qualified yes, according

to Cawleys analysis of recent Empire State Polls, annual telephone surveys of New York State residents administered through the Cornell University Survey Research Institute. In an analysis of the 2008 poll, Cawley found that the average amount taxpayers were willing to spend for a 50 percent reduction in childhood obesity was $49.41 annually per household (Cawley, 2008). That would result in more than $690 million collected from New York state residents, which is more than the state is currently spending on the problem. On average, those who were willing to pay more had higher household incomes, identified childhood obesity as a major problem, and identified themselves as liberal or as Democrats. In his analysis of the 2009 poll, Cawley found that the level of public support for anti-obesity policies was influenced by how the issue of costs was framed. When costs were not mentioned, 92.1 percent agreed with improving the nutrition of food in school cafeterias (Cawley, 2010). If the question was changed to say even if it requires raising taxes, at the end, agreement fell to 69.5 percent. If the question began with a discussion of costs, only 40.5 percent agreed. A similar pattern was found regarding increasing the quality and quantity of physical education in schools. While these results provide insights into taxpayers support and willingness to pay for anti-obesity policies, his analyses also highlight the need for cautious interpretation of polls because peoples responses can be very sensitive to the ways questions are worded that emphasize different tradeoffs. The personal and social costs of obesity are high. The tools of economic analysis can help identify the causes and consequences of obesity, and allocate scarce resources to the anti-obesity policies and programs that can most improve social welfare. Resources for Program Developers and Policy Makers Robert Wood Johnson Foundation Childhood Obesity Initiative: National Collaborative on Childhood Obesity: CDC Overweight-Obesity Information:

National Institutes of Health We Can Initiative Ways to Enhance Childhood Activity and Nutrition: The Campbell Collaboration: The Promising Practices Network: Social Programs that Work: What Works Clearinghouse: References Burkhauser, R.V., Cawley, J. and Schmeiser, M.D. (2009). The timing of the rise in U.S. obesity varies with measure of fatness. Economics and Human Biology, 7(3), 307-318.
Cawley, J. (2008). Contingent valuation analysis of willingness to pay to reduce childhood obesity. Economics and Human Biology, 6(2): 281-292. Cawley, J. (2010). The economics of childhood obesity. Health Affairs, 29(3), 364-371. Cawley, J. (2004). The Impact of Obesity on Wages. Journal of Human Resources, 39(2), 451-474. Cawley, J., Joyner, K. and Sobal, J. (2006). Size matters: The influence of adolescents weight and height on dating and sex. Rationality and Society, 18(1), 67-94. Cawley, J. and Liu, F. (2007). Maternal employment and childhood obesity: A search for mechanisms in time use data. NBER Working Paper Series, Paper no.13600. Cawley, J., Markowitz, S. and Tauras, J. (2004) Lighting up and slimming down: The effects of body weight and cigarette prices on adolescent smoking initiation. Journal of Health Economics, 23(2), 293-311. Cawley, J., Meyerhoefer, C. and Newhouse, D. (2007). The impact of state physical education requirements on youth physical activity and overweight, Health Economics, 16(12), 1287-1301. Cawley, J., and Price, J.A. (in press). Outcomes in a program that offers financial rewards for weight loss. In: M. Grossman (ed.), Economic Aspects of Obesity. Chicago IL: University of Chicago Press.

Cawley, J., Rizzo, J.A., and Haas, K. (2007). Occupationspecific absenteeism costs associated with obesity and morbid obesity. Journal of Occupational and Environmental Medicine, 49(12), 1317-1324. Cawley, J. and Spiess, C.K. (2008). Obesity and skill attainment in early childhood. Economics and Human Biology, 6(3), 388-397.

Development of this publication was supported by Smith Lever funds from the Cooperative State Research, Education, and Extension Service, U.S. Department of Agriculture. Any opinions, ndings, conclusions, or recommendations expressed here are those of the author(s) and do not necessarily reect the view of the U.S. Department of Agriculture.

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