DP12484 How well targeted are soda taxes?

Author(s): Pierre Dubois, Rachel Griffith, Martin O'Connell
Publication Date: December 2017
Date Revised: February 2019
Keyword(s): discrete choice demand, Pass-Through, preference heterogeneity, soda tax
JEL(s): D12, H31, I18
Programme Areas: Industrial Organization
Link to this Page: 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 study individual level purchases made on-the-go. 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 key individual characteristics. We show that soda taxes are relatively effective at targeting young and poor consumers but not individuals with high total dietary sugar; they are unlikely to be strongly regressive especially if we account for averted future costs from over consumption.