Can nonprofit target-setting mechanisms drive for-profit compliance? Evidence from sodium content

Abstract

The 2009 National Salt Reduction Initiative (NSRI) set sodium content targets for packaged food products in the United States. Some manufacturers pledged to meet the NSRI targets by 2014. We quantify the causal effect of the NSRI on sodium content reductions. Our identification of the effect rests on two pillars. First, the NSRI targets were set exogenously as they were determined by public health authorities (rather than firms) and according to criteria that are arguably unrelated to supply or demand factors. Second, the NSRI created unequal incentives for product reformulation: Firms had an incentive to only reformulate products with sodium content above the NSRI target. Furthermore, compliance with the targets implied that a greater sodium reduction was needed for products farther above the targets. Using a kink regression discontinuity design, we show that the NSRI reduced excess sodium content by about 30 percent. Interestingly, we find that the NSRI had a causal effect on firms that declared their pledge to the voluntary program (signatories) as well as on those that did not (non-signatories). We discuss possible reasons for the effectiveness of this target-setting mechanism.