Simulating welfare effects of the European nutrition and health claims' regulation: The Italian yogurt market

Abstract

With the enactment of Regulation (EC) No. 1924/2006, 20 December 2006, 'On nutrition and health claims made on foods' several health claims can no longer be used on food products in European markets. We simulate the overall impact of the regulation on consumers and producers using the Italian yogurt market as a case study, and data prior to the introduction of the policy. We quantify welfare losses incurred if accepted claims were false, and simulate scenarios where rejected truthful health claims are removed, considering also the case where the products carrying them exit the market. We find that consumers can incur large welfare losses if approved claims are untruthful; if truthful claims are instead denied both consumers and producers may incur losses, with consumers being penalised more than producers.