BID Seminar: ‘Do consumers respond to “sin taxes” heterogeneously? New evidence from the tax on sugary drinks using longitudinal scanner data’

Research Cluster

Speaker:Eleonora Fichera, University of Bath
Date: Thursday 23 May 2019
Time: 11.30 - 12.30
Location: Streatham Court D

Further details

The introduction of taxes on sugar sweetened beverages (SSBs) across the world has been justified as a way to internalize externalities associated with the costs of excessive sugar consumption, linked to obesity. However, it is still unclear what the effects of these taxes are on consumer behaviour and which consumers may be affected the most. We evaluate the effect of the piece-wise SSB tax introduced in Catalonia (but not in Spain) in May 2017 using longitudinal scanner data of monthly purchases by 1M households from May 2016 to April 2018. Using a Difference-in-Differences approach, we study the SSB tax effect on expenditure shares for the full beverage basket in an Almost Ideal Demand System, and on the consumption of beverages and sugar. Our results suggest a reduction in high sugared beverage expenditure shares by 5-31% of the sample mean. Households have substituted these beverages with their lower sugar counterparts. This has led to a 2.2% overall reduction in sugar consumption. These results are stronger for younger and relatively richer households. Our study implies that although sin taxes moderately change consumer behaviour, they are unlikely to be the single bullet that reduces obesity. We show that this may be due to the fact that the tax pass-through was too low.