A tale of economic advantage driven by obesity | Guest Opinion

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In the United States, being obese has few benefits and many costs. For instance, there are adverse health impacts stemming from the increased likelihood of chronic diseases, joint problems and sleep apnea. Then there are negative financial consequences stemming from higher medical costs and potentially higher insurance premiums. Perhaps most importantly, there are social and lifestyle challenges to confront. It is well known that many obese individuals face biases in the workplace, in schools and in social settings. When viewing an obese individual, many Americans make the inference that this individual is either undisciplined, or gluttonous, or just plain lazy.

Given this unsavory state of affairs, it is worth noting that in some developing nations, obesity can actually help individuals from an economic standpoint. This interesting and somewhat counterintuitive conclusion is the result of thought-provoking new research by the economist Elisa Macchi. This research explores the economic implications of obesity as a status symbol in low-income countries, focusing specifically on Kampala, the capital city of Uganda.

The background is that in many low-income nations, obesity is often perceived as a sign of affluence and prosperity, contrasting with its typical association with health risks. This perception stems from the correlation between higher body mass and wealth in these regions, where food scarcity can make weight gain a symbol of financial stability. The research under discussion investigates how this societal view influences economic interactions, especially in contexts where information asymmetries are prevalent.

Professor Macchi employs two complementary experiments in Kampala to examine the relationship between obesity, perceived wealth and economic benefits. The so-called “beliefs experiment,” assesses perceptions associated with obesity. Participants in the experiment are shown weight-manipulated portraits and asked to evaluate individuals on various attributes, including wealth, beauty, health and trustworthiness.

In the so-called “credit experiment,” numerous professional loan officers from a variety of financial institutions evaluated hypothetical borrower profiles, each accompanied by a portrait randomly assigned to depict an obese or a non-obese individual. The profiles varied in the amount of financial information provided, allowing for an analysis of how obesity influences credit decisions under different levels of information asymmetry.

The findings from these experiments are provocative. First, the beliefs experiment demonstrated that obese individuals are perceived to be significantly wealthier than their non-obese counterparts. However, obesity did not affect perceptions of beauty, health, life expectancy, self-control, ability, or trustworthiness. This suggests that in Kampala, obesity serves primarily as a signal of wealth rather than other personal attributes.

Second, the credit experiment showed that loan officers were more inclined to approve loans and request meetings with obese borrowers. Surprisingly, what we might call the “obesity premium” compared favorably with an increase of over 60 percent in self-reported earnings. This indicates that obesity can facilitate access to credit, most likely because of its association with perceived wealth. It is important to comprehend that this “obesity premium” was most pronounced when loan officers had limited financial information about borrowers. As more financial details were provided to these officers, the influence of obesity on credit decisions diminished significantly. This suggests that in situations of high information asymmetry, physical cues like obesity are used as proxies for financial reliability.

This notwithstanding, the research shows that both the general population and loan officers tended to overestimate the economic advantages associated with obesity. For instance, laypeople believed that obese individuals had a higher likelihood of loan approval than was actually the case. This overestimation points to potential market distortions, where decisions are influenced by inaccurate beliefs about the economic benefits of obesity.

Three policy implications emanating from the above findings are worth emphasizing. First, relying on physical attributes like obesity as indicators of creditworthiness can lead to inefficiencies in credit allocation. In this regard, enhancing access to accurate financial information can mitigate the reliance on such proxies and thereby improve lending decisions.

Second, the perceived economic benefits of obesity may discourage healthy behaviors and contribute to rising obesity rates in low-income nations. Public health initiatives should address these perceptions and promote awareness of the health risks associated with obesity.

Finally, understanding the cultural context in which obesity is viewed as a status symbol is crucial for designing effective health and economic policies. To be more effective, policy interventions ought to consider these societal perceptions.

Batabyal is a Distinguished Professor, the Arthur J. Gosnell professor of economics and the Head of the Sustainability Department, all at RIT, but these views are his own.