DP12484 How well targeted are soda taxes?

Author(s): Pierre Dubois, Rachel Griffith, Martin O'Connell
Publication Date: December 2017
Keyword(s): discrete choice demand, Pass-Through, preference heterogeneity, soda tax
JEL(s): D12, H31, I18
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12484

Soda taxes aim to reduce excessive sugar consumption. Their effectiveness depends on whether they target individuals for whom the harm of consumption is largest. We estimate demand and account for supply-side equilibrium pass-through. We exploit longitudinal data to estimate individual preferences, which allows flexible heterogeneity that we relate to a wide array of individual characteristics. We show that soda taxes are effective at targeting young consumers but not individuals with high total dietary sugar; they impose the highest monetary cost on poorer individuals, but are unlikely to be strongly regressive if we account for averted future costs from over consumption.