The distributional impact of a green payment policy for organic fruit

Abstract

Consumer spending on organic food products has grown rapidly. Some claim that organics have ecological, equity, and health advantages over conventional food and therefore should be subsidized. Here we explore the distributive impacts of an organic fruit subsidy that reduces the retail price of organic fruit in the US by 10 percent. We estimate the impact of the subsidy on organic fruit demand in a representative poor, middle income, and rich US household using three analytical methods; including two econometric and one machine learning. We do not find strong evidence of regressive redistribution due to our simulated organic fruit subsidy; the poor household’s relative reaction to the subsidy is not much different than the reaction at the other two households. However, the infra-marginal savings from the subsidy tend to be larger in richer households.