Front-of-pack labeling in Chile: effects on employment, real wages, and firms’ profits after three years of its implementation

Abstract

This study evaluates the impact of Chile's innovative law on Food Labeling and Advertising, enacted in June 2016, on employment and real wages and profit margins for the food and beverage manufacturing sectors in the 2016-2019 period, using unique company-specific monthly data from Chile's tax collection agency (measuring aggregate employment, real wages, average size of firms, and gross profit margins of the food and beverage manufacturing sector). Interrupted-time series analyses (ITSA) on administrative data from tax-paying firms was used and compared to synthetic control groups of sectors not affected by the regulations. ITSA results show no effect on aggregate employment nor on the average size of the firms, while they show negligible effects on real wages and gross margin of profits (as proportion of total sales), after the first two stages of the implementation (36 months), despite significant decreases in consumption in certain categories (sugar-sweetened beverages, breakfast cereals, etc.). Despite the large declines found in purchases of unhealthy foods, employment did not change and impacts on other economic outcomes were small. Though Chile's law, is peculiar there is no reason to believe that if similar regulations were adopted elsewhere, they would have different results.