Trans-Fats, Nudging and Human Lives : Towards an Optimal Regulatory Intervention

In 2003, Denmark was the first industrialized country to outlaw the use of trans fats to tackle the harmful effects on human health. In 2009, Austria and Switzerland followed suit with the substantial restrictions on the use of trans fats. Other industrialized countries disfavored the ban and preferred the mandatory labelling of trans fats and various types of voluntary compliance and consumer pressure policies. In this paper, we examine the effects of the ban on trans fats versus alternative policy options on human health for a sample of 35 industrialized countries for the period 1990-2014. The evidence based on difference-in-differences policy analysis advocates large beneficial effects of a ban on public health. In particular, we observe a marked decline in sylotic blood pressure, cholesterol level, and ischaemic heart diseases. The beneficial effects of the ban are not sensitive to the measurement error and alternative distributional assumptions, hold across treatment and control samples, and remains robust to the variety of control variables related to food consumption, income, demand elasticities and unobserved heterogeneity bias. Furthermore, the distributional analysis suggests the effect of the ban is substantially larger in countries with relatively worse public health outcomes compared to the uniform but weaker effects of voluntary pledges, intention-to-pursue policies, consumer pressure and mandatory labelling. Using the nearest-neighbor matching strategy, conditional post-treatment effects of the ban suggest it contributes most to the reduction in ischaemic heart diseases compared to alternative policy options after controlling for the non-stationarity and mean reversion of the public health outcomes over time. Strong and persistent effects of the ban do not disappear once country-specific time trends are controlled for, and are furthered demonstrated by constructing synthetic counterfactual using Denmark as the treatment benchmark. The effects of the ban appear to be causal and holds across a number of specification checks. While employing well-defined normative criteria of wealth-maximization paper offers a legal and economic arguments for an improved regulatory response and for much needed liberal paternalistic intervention (nudgiung). The paper is an attempt to find out what new light the empirical analysis of law can shed on the issues of public health to help to clarify it