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How well targeted are soda taxes? Pierre Dubois, Rachel Griffith and Martin O’Connell Nemmers Prize Conference, May 2017 Introduction A tax on soda Demand Estimates Analysis Summary 1 / 38

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Page 1: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

How well targeted are soda taxes?

Pierre Dubois, Rachel Griffith and Martin O’Connell

Nemmers Prize Conference, May 2017

Introduction A tax on soda Demand Estimates Analysis Summary 1 / 38

Page 2: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

Corrective Taxes

I Corrective taxes have long been seen as a tool to improve socialwelfare when consumption imposes costs on others

I externalities (Pigou, 1920)

I taxes on fuel, alcohol, tobacco, gambling are examples

I More recently have been advocated to reduce consumption thatimposes costs on your future self

I “internalities”

I Gruber and Koszegi, 2004; ODonoghue and Rabin, 2006; Haavio andKotakorpi, 2011; Allcott, Mullainathan and Taubinsky, 2014, ...

I Soda taxes are a leading example

Introduction A tax on soda Demand Estimates Analysis Summary 2 / 38

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Excess consumption of sugar

I Considerable evidence of very high consumption of sugar

I in US over 65% of population and in UK over 70% consume more thanrecommended max of 10% total calories from added sugar

I even higher amongst children

I Growing evidence that

I leads to obesity, type 2 diabetes, heart disease, cancers, etc...

I is associated with decreased bone density and other signs ofmalnutrition and poor mental health, particularly in children

I may be a driver of poor performance and long term outcomes inchildren from low socio-economic status households

Introduction A tax on soda Demand Estimates Analysis Summary 3 / 38

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Mean consumption of added sugar per dayRecommended maximum is 37.5 grams for men and 25 grams for women

Source: Euromonitor

Introduction A tax on soda Demand Estimates Analysis Summary 4 / 38

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Children have shifted from milk to soda, US

Source: Nielsen and Popkin (2004), calories from drinks children ages 2-18

Introduction A tax on soda Demand Estimates Analysis Summary 5 / 38

Page 6: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

Children massively over consume sugar, UK

Introduction A tax on soda Demand Estimates Analysis Summary 6 / 38

Source: NDNS

years old: 1.5-3 4-10 11-18 19-64 65+

Page 7: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

Soda taxes

I World Health Organisation (WHO) has urged countries to tax sugarydrinks to reduce sugar consumption, especially in children

I Taxes on soda or sugar in soda have been introduced in

I France in 2012, Mexico in 2013, UK in 2016

I four cities in California (Albany, Berkeley, Oakland, and San Francisco)

I Boulder, Philadelphia

I Cook County website

I “On November 10, 2016, the Cook County Board of Commissionerspassed the Cook County Sweetened Beverage Tax Ordinance. The taximposed will be at the rate of $0.01 per ounce on the retail sale of allsweetened beverages in Cook County. The effective date of the tax isJuly 1, 2017.”

Introduction A tax on soda Demand Estimates Analysis Summary 7 / 38

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Why target soda?

I Soda represents a substantial share of sugar consumption

I Soda consumption is higher for those consuming a lot of sugar

I particularly children and young adults

I Soda has no redeeming nutritional characteristics

Introduction A tax on soda Demand Estimates Analysis Summary 8 / 38

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Soda is a large % of calories from added sugar, US

Introduction A tax on soda Demand Estimates Analysis Summary 9 / 38

50%

0%

Share ofcalories fromadded sugarthat comefrom soda

Share of calories from added sugarSource: NHANES

Page 10: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

And more so for younger consumers, US

Introduction A tax on soda Demand Estimates Analysis Summary 10 / 38

50%

0%

Share ofcalories fromadded sugarthat comefrom soda

AgeSource: NHANES

Page 11: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

Soda is a large % of calories from added sugar, UK

Introduction A tax on soda Demand Estimates Analysis Summary 11 / 38

50%

0%

Share ofcalories fromadded sugarthat comefrom soda

Share of calories from added sugarSource: NDNS

Page 12: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

And more so for younger consumers, UK

Introduction A tax on soda Demand Estimates Analysis Summary 12 / 38

50%

0%

Share ofcalories fromadded sugarthat comefrom soda

AgeSource: NDNS

Page 13: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

Soda Taxes

I Soda taxes largely aim to correct for internalities

I people make errors, we might be able to design policies to help themmake better choices (e.g. O’Donoghue and Rabin, 2003, 2006)

I tax might serve as a commitment device that benefits those at risk ofmaking errors

I but only if they respond to tax, if have inelastic demand they mightboth pay the tax and bear the internal costs in future

I We empirically evaluate the efficiency and equity implications ofrecently introduced soda taxes

I overall, high sugar consumers have inelastic demand for sugary soda,don’t respond

I however, younger consumers (including those with high sugarconsumption) are more price elastic and do respond

Introduction A tax on soda Demand Estimates Analysis Summary 13 / 38

Page 14: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

Our contribution

I We estimate demand (discrete choice) for drinks “on-the go”

I less well studied than the “at home” market

I optimisation errors may be worse in this context (temptation)

I accounts for around half of soda consumption

I We exploit longitudinal data to estimate individual specific demands

I these can be used to directly assess how well targeted a tax is byrelating individual consumers’ responsiveness to the tax to othercharacteristics that proxy for marginal harm

I we can also study the distributional consequences of the tax

I To help organise discussion of our empirical results and highlight thekey forces at play we first consider the effects of a soda tax using asimple welfare criterion

Introduction A tax on soda Demand Estimates Analysis Summary 14 / 38

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A tax on sugar in soda

I consumers: i ∈ 1, ...,N, with income yi

I food and drink products: j = 1, ..., j ′, j ′ + 1, ..., J ∈ Ω

I sodas: j ∈ 1, ..., j ′ = Ωw

I other products that contain sugar: j ∈ j ′ + 1, ..., J = Ωnw

I p = (p1, . . . , pJ)′: post tax prices

I zj : sugar in each product

I τ : tax rate on the sugar in soda

I vi (p, yi ): indirect decision utility

I demands are: qij(p, yi ) = −∂vi/∂pj∂vi/∂yi

Introduction A tax on soda Demand Estimates Analysis Summary 15 / 38

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A tax on sugar in soda

I Total sugar in a consumer’s diet

Si (p, yi ) =∑j∈Ω

qij(p, yi )zj

I includes sugar from soda (w) and non-soda (nw)

Si (p, yi ) = Swi (p, yi ) + Snwi (p, yi )

I vi (p, yi ) governs choice, but not necessarily long term welfare

I sugar consumption may give rise to future costs, both to the consumer(internalities) and to others (externalities), that consumers do not takeaccount of at the point of consumption

I φi (Si (p, yi )): the internality (+ externality) from sugar consumption

I consumers ignore this when making choices

Introduction A tax on soda Demand Estimates Analysis Summary 16 / 38

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A tax on sugar in soda

I Policy maker chooses a tax on sugar in soda (τ) to maximise autilitarian social welfare function,

W =∑i

[vi (p, yi + ri )− φi (Si (p, yi + ri ))]

I where [vi (.)− φi (.)] is consumer’s long run welfare

I ri is any rebate to consumer i

I pj denotes the pre-tax price

I for soda products (j ∈ Ωw ), pj = pj + τzj

I for non-soda products (j ∈ Ωnw ) pj = pj

Introduction A tax on soda Demand Estimates Analysis Summary 17 / 38

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A tax on sugar in soda

I Effect of a marginal change in the soda tax:

dW

dτ=

∑i(φ′i − τ λ)|S ′w

i |︸ ︷︷ ︸direct efficiency

−∑

iφ′iS

′nwi︸ ︷︷ ︸

indirect efficiency

−∑

i(λi − λ)Sw

i︸ ︷︷ ︸redistribution

I φ′i is the marginal internality (+externality) of consumer i

I S ′i impact of marginal change in tax rate on consumer’s sugar demand

I λi is the marginal (decision) utility of income of consumer i

I λ =∑

i βiλi is weighted average marginal utilities

Introduction A tax on soda Demand Estimates Analysis Summary 18 / 38

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A tax on sugar in soda

I Effect of a marginal change in the soda tax:

dW

dτ=

∑i(φ′i − τ λ)|S ′w

i |︸ ︷︷ ︸direct efficiency

−∑

iφ′iS

′nwi︸ ︷︷ ︸

indirect efficiency

−∑

i(λi − λ)Sw

i︸ ︷︷ ︸redistribution

I Consumers with a marginal internality above the tax rate

I this term is positive, reduction in sugar leads to a welfare gain

I the size of the gain is proportional to how responsive the consumer’sdemand for sugar in soda is to the tax

I higher correlation between φ′i and |S

′wi | the more effective the tax

I Consumers with marginal internality below tax rate

I this term is negative

Introduction A tax on soda Demand Estimates Analysis Summary 18 / 38

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A tax on sugar in soda

I Effect of a marginal change in the soda tax:

dW

dτ=

∑i(φ′i − τ λ)|S ′w

i |︸ ︷︷ ︸direct efficiency

−∑

iφ′iS

′nwi︸ ︷︷ ︸

indirect efficiency

−∑

i(λi − λ)Sw

i︸ ︷︷ ︸redistribution

I if taxing the sugar in soda increases demand for untaxed sugar(S

′nwi > 0), this will have a negative welfare effect

I the stronger the correlation between φ′i and S

′nwi

I i.e. the more strongly consumers with large marginal internalities switchto other forms of sugar (fruit juice, chocolate milk, chocolate ...)

I the larger will be this inefficiency cost from only taxing a subset of sugar

Introduction A tax on soda Demand Estimates Analysis Summary 18 / 38

Page 21: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

A tax on sugar in soda

I Effect of a marginal change in the soda tax:

dW

dτ=

∑i(φ′i − τ λ)|S ′w

i |︸ ︷︷ ︸direct efficiency

−∑

iφ′iS

′nwi︸ ︷︷ ︸

indirect efficiency

−∑

i(λi − λ)Sw

i︸ ︷︷ ︸redistribution

I if consumers with high marginal utility of income have high demandsfor sugary soda then this term will have a negative effect and the taxwill be regressive

Introduction A tax on soda Demand Estimates Analysis Summary 18 / 38

Page 22: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

We empirically assess the effects of tax on sodaI We estimate demand for drinks “on-the-go” to obtain estimates of

I substitution away from the sugar in soda (S′wi ) in response to tax

I how strongly switch to alternatives (S′nwi ) in response to tax

I We want to correlate these with

I marginal utility of income (λi )

I marginal internalities (φ′i ) – unobserved (unobservable?)

I marginal internalities may vary across people for two reason:

I (a) the function may be convex in sugar, so two similar people, onewith low and one with high sugar consumption, may create significantlydifferent marginal internalities

I (b) for a fixed amount of sugar, some people may have largerinternalities associated with sugar (e.g. children)

Details

Introduction A tax on soda Demand Estimates Analysis Summary 19 / 38

Page 23: Pierre Dubois, Rachel Gri th and Martin O’Connell … · Pierre Dubois, Rachel Gri th and Martin O’Connell ... recommended max of 10% total calories from added sugar I even higher

Demand model overview

I Model demand for drinks on-the-go

I discrete choice model, choice of drink conditional on buying a drink

I individual chooses one of several options

I one of several soda products, some with sugar some diet

I non-soda drinks with sugar

I non-soda drinks without sugar (mainly water)

I show robustness to upper stage model to buy a drink, chocolate bar, orother (non-sugary) snack

I Estimate individual specific demands

I exploiting long panel, allow preferences for price, sugar and soda to beindividual specific

I other preferences vary by demographic group (gender-age)

Introduction A tax on soda Demand Estimates Analysis Summary 20 / 38

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Data

I “On-the-go” purchases decision

I 5,373 individuals, aged 13+

I June 2010-October 2012

I make at least 25 purchases

I 75% purchase at least one drink, 48% purchase soda at least once

I use data on 180,675 transactions, mean of 81 per individual

I all food and drinks purchases made by the individual “on-the-go”

I participants use mobile phones to record purchases

I all grocery purchases made by the household

I scanned in the home

I collected by market-research firm Kantar

Introduction A tax on soda Demand Estimates Analysis Summary 21 / 38

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Products

Brand Variety Size Market Price g sugarshare (£) per 100ml

Coca Cola 38.1%Regular 330ml can 6.2% 0.62 10.6Regular 500ml bottle 11.2% 1.08 10.6Diet 330ml can 7.1% 0.63 0.0Diet 500ml bottle 13.6% 1.09 0.0

Pepsi 15.1%Regular 330ml can 1.6% 0.61 11.0Regular 500ml bottle 3.5% 0.96 11.0Diet 330ml can 1.9% 0.62 0.0Diet 500ml bottle 8.2% 0.95 0.0

other soda products: Fanta, Lucozade, Oasis, Ribena, ...

Non-soda options Fruit juice 330ml 4.0% 1.39 10.6Flavoured milk 500ml 2.2% 0.96 10.6

Outside option Water 12.3%

Introduction A tax on soda Demand Estimates Analysis Summary 22 / 38

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Empirical specification

I Indirect decision utility:

Uijt = αipjrt + βi sj + γiωj + δd(i)xj + ξd(i)b(j)t + ζd(i)b(j)r + εijt

I j : product, belonging to brand b(j)

I i : consumer, belonging to demographic group d(i)

I pjrt : price of product j at time t in outlet r

I sj : sugary vs. diet; ωj soda or non-soda; xj : pack size

I ξd(i)b(j)t demographic group-brand-time effects

I ζd(i)b(j)r demographic group-brand-retail outlet effects

I εijt idiosyncratic shock, type I extreme value

I outside option Ui0t = ζd(i)0rt + εi0t

Introduction A tax on soda Demand Estimates Analysis Summary 23 / 38

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Preference heterogeneity

I Price (αi ), sugar (βi ) and soda (γi ) preferences are consumer specific

I we treat α = (α1, ...αN)′, β = (β1, ...βN)′ and γ = (γ1, ...γN)′ asparameters

I using large T dimension of data to recover estimates of (α,β,γ)

I and large N dimension to construct nonparametric estimate off (αi , βi , γi )

I The probability of observing yi = (yi1, ..., yiT ), consumer i ’s sequenceof choices; where Pit is standard logit choice probability, is:

Pi (yi ) =∏t

Pit(yit)

I we maximise the associated log-likelihood function:

l(α,β,γ, η) =∑i

lnPi (yi )

Introduction A tax on soda Demand Estimates Analysis Summary 24 / 38

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Individual specific vs. random coefficient logit

I Preference heterogeneity

I standard empirical approach (random coefficients logit) requiresdistribution assumptions, allows us to recover distribution of preferencesby estimating a small number of parameters

I we estimated individual specific coefficients, we don’t need to specifythe functional form of preference distribution

I Most importantly, we recover consumer specific parameters andtherefore can relate them to other information about consumers

I we can correlate slopes of demand (S′wi , S

′nwi ) with income, share of

calories from added sugar, age and other proxies for marginalinternalities or propensity to make optimisation errors

I this is key if we want to understand who is affected by the tax and howwell targeted it is

Introduction A tax on soda Demand Estimates Analysis Summary 25 / 38

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Identifying the effect of price

I We measure prices at the product-outlet-month levelOutlet Mean price Std.Dev. TransactionsTesco Metro or kiosk 0.879 0.223 19471Vending machine 0.978 0.246 15082Corner store by region

Greater London 0.944 0.272 29448South 0.958 0.228 24874Midlands 0.919 0.258 32710North 0.923 0.246 59090

I we include ξd(i)b(j)t + ζd(i)b(j)r demographic group-brand effects thatvary by time and by retail outlet, control for common shocks to demand

I we exploitI individuals shopping in multiple outlets, we assume that outlet choice is

independent of demand shock and use cross-outlet variation in relativeprices of different drinks

I we assume unobserved effects are common across products within thesame brand, we use differential time series variation in product pricewithin brands, assume that is driven by costs (factors other than shocksto demands) Details

Introduction A tax on soda Demand Estimates Analysis Summary 26 / 38

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Incidental parameters problem

I Our estimator will be asymptotically biased ( Arellano and Hahn,2007)

I even if both N →∞ and T →∞, if N and T grow at the same rate(NT → ρ where ρ is a non zero constant)

I Methods exist that reduce the bias from being of order 1/T to 1/T 2

I we use the split sample jackknife bias correction procedure suggested inDhaene and Jochmans (2015)

I split the sample in two and use the sub-sample estimates as anadjustment to correct the full sample maximum likelihood estimate

I other methods exist (Arellano and Hahn (2007), Arellano andBonhomme (2011), Hahn and Newey (2004))

I we show that our results are not overly affected by this problem

Details

Introduction A tax on soda Demand Estimates Analysis Summary 27 / 38

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Distribution of estimated consumer specific preferences

StandardVariable Estimate error

Price Mean -1.7856 0.0727Standard deviation 4.3500 0.0898Skewness 0.6999 0.1892Kurtosis 6.6126 0.9868

Soda Mean -0.6297 0.0938Standard deviation 2.8590 0.0622Skewness 0.1663 0.1994Kurtosis 5.5891 1.0256

Sugar Mean -0.0027 0.0218Standard deviation 2.0513 0.0836Skewness -0.8439 0.5754Kurtosis 9.3688 4.3680

Price-Soda Covariance -5.6252 0.3427Price-Sugar Covariance -1.0102 0.2236Soda-Sugar Covariance 0.4631 0.2928

Correlation with sugar Correlation with income Correlation with age Product elasticities

Introduction A tax on soda Demand Estimates Analysis Summary 28 / 38

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Correlation between φ′i and S′wi

dW

dτ=

∑i

(φ′i − τ λ)|S

′wi | −

∑i

φ′iS

′nwi −

∑i

(λi − λ)Swi

I (a) high sugar consumers are less responsive to price of sugary sodaI suggests tax will not be effective

I (b) younger consumers are more responsive to price of sugary sodaI suggests tax will be effective

(a) (b)

Introduction A tax on soda Demand Estimates Analysis Summary 29 / 38

Ownprice

elasticitysugarysoda

Agedecile of % calories from sugar

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Correlation between φ′i and S′nwi

dW

dτ=

∑i

(φ′i − τ λ)|S

′wi | −

∑i

φ′iS

′nwi −

∑i

(λi − λ)Swi

I (a) high sugar and (b) younger consumers are both more willing tosubstitute to other sugary drinks when price of sugary soda rises

I suggests tax will not be effective

(a) (b)

Introduction A tax on soda Demand Estimates Analysis Summary 30 / 38

Crossprice

elasticitysugarysodaandothersugarydrinks

Agedecile of % calories from sugar

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The impact of a tax on soda

dW

dτ=

∑i

(φ′i − τ λ)|S

′wi | −

∑i

φ′iS

′nwi −

∑i

(λi − λ)Swi

I Households with lower equivalised total annual grocery expenditurepurchase more sugary soda

Introduction A tax on soda Demand Estimates Analysis Summary 31 / 38

Volumesugarysoda

consumption(liters)

Deciles of equivalised grocery expenditure

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Simulate the effects of soda taxes

I sugary soda tax: 11p tax per can (335ml or 12oz) on only sugarysoda (similar to UK, Berkeley, Cook County)

I average price increase of around 12% on affected products

I we assume pass-through is 100%

I Cook County government website:“Who Pays the Tax? The ultimate incidence of and liability forpayment of the sweetened beverage tax is to be borne by the purchaserof the sweetened beverage. ”

I In paper we compare to soda tax, applied to all soda (diet or sugary),similar to tax recently introduced in Philadelphia

% ∆Q

Introduction A tax on soda Demand Estimates Analysis Summary 32 / 38

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Average effect of tax

Change followingsugary soda tax

% reduction sugar from soda -5.8%[-6.2, -5.3]

% reduction sugar from all drinks -4.7%[-4.9, -4.3]

I reduction of sugar from soda = 84g sugar, around 340 calories,equivalent of 2.5 cans of Coke

I reduction of sugar from all drinks = 76g sugar, around 300 calories,equivalent of 2 cans Coke

Details

Introduction A tax on soda Demand Estimates Analysis Summary 33 / 38

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Change in sugar from sugary soda tax

I high added sugar consumers reduce sugar consumption from soda byless in response to the tax

(a) in grams (b) as % of sugar from soda

Robustness to chocolate

Introduction A tax on soda Demand Estimates Analysis Summary 34 / 38

decile of % calories from sugar

-120g

-40g -2%

-8%

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Change in sugar from sugary soda tax

I younger consumers reduce sugar consumption from soda by more inresponse to the tax

I 150g sugar, around 600 calories, more than 4 cans of Coke

Robustness to chocolate

Introduction A tax on soda Demand Estimates Analysis Summary 35 / 38

-150g

0g 0g

-200g

Age decile of % calories from sugar

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Compensating variation from a sugary soda tax

I Compensating variation is higher for individuals in households withlower equivalised total annual grocery expenditure

(a) (b)

Introduction A tax on soda Demand Estimates Analysis Summary 36 / 38

decile of equivalised total grocery expenditure

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Compensating variation from a sugary soda tax

I (a) compensating variation is higher for high sugar consumers (whodid not reduce sugar consumption by much)

I (b) compensating variation is higher for younger consumers (who didreduce sugar consumption)

(a) (b)

Introduction A tax on soda Demand Estimates Analysis Summary 37 / 38

Age% calories from sugar

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Summary

I A tax on sugary soda reduces mean sugar consumption

I there is weaker switching away from sugar from those with high addedsugar in their diets relative to those with lower added sugar

I high sugar consumers have both stronger preferences for sugar in drinksand are less price sensitive, leading them to be less willing to switchaway from sugary soda when facing higher prices

I however, young consumers with high sugar consumption do respond

I they are more price sensitive

I compensating variation is high, but they also (probably) benefit fromlower internalities (lower future costs)

I older consumers with high overall sugar consumption are worse off

I We needed the flexible heterogeneity from the individual specificcoefficient logit to learn this

Introduction A tax on soda Demand Estimates Analysis Summary 38 / 38

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Additional slides

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Proxies for internalities Back

I (a) the function may be convex in sugar, so two similar people, onewith low and one with high sugar in diet may create significantlydifferent marginal internalities

I (b) even for a fixed amount of sugar, some people (e.g. children) mayhave larger internalities associated with sugar

(a) (b)

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Gramssugarfromsoda

AgeShare of calories from added sugar

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Average effect of tax Back

Change followingsugary soda tax

% reduction sugar from soda -5.8%[-6.2, -5.3]

% reduction sugar from all drinks -4.7%[-4.9, -4.3]

Comp var per 100g sugar reduction £4.51[4.25, 4.89]

Net comp var per 100g sugar reduction £0.13[0.13, 0.14]

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Participation in market

Female Male Total<40 40+ <40 40+

Never purchase drink 230 456 280 512 147818.7 30.5 23.5 35.3 27.5

Only purchase non-soda drinks 321 430 242 339 133226.0 28.7 20.3 23.3 24.8

Purchase soda 682 611 669 601 256355.3 40.8 56.2 41.4 47.7

Total 1233 1497 1191 1452 5373100.0 100.0 100.0 100.0 100.0

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Soda consumers

Purchase:Soda and Only sodanon soda Total

Only diet 66 64 1302.6 2.5 5.1

Both diet and sugary 1492 399 189158.2 15.6 73.8

Buy only sugary 375 167 54214.6 6.5 21.1

Total 1933 630 256375.4 24.6 100.0

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Price variation for Coca Cola

(a) 330ml can (b) 500ml bottle(c) Within brand price vari-ation

Back

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Incidental parameters problem Back

Relationship of bias for sugar preference parameters with T

(a) Price (b) Soda

(c) Sugar

T is number of time series observations for individual. Correction uses the split samplejackknife bias correction procedure suggested in Dhaene and Jochmans (2015). We splitthe sample in two and use the sub-sample estimates as an adjustment to correct the fullsample maximum likelihood estimate. Dots represent consumer level differences. Linesare local polynomial regressions.

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Incidental parameters problem Back

Bias for sugar preference parameters relationship with sugar

(a) Price (b) Soda

(c) Sugar

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Incidental parameters problem Back

Distribution of preference parameters

(a) Price (b) Soda

(c) Sugar

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Preference parameters and % calories from added sugarBack

(a) Price (b) Sugar

(c) Soda

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Preference parameters and “income” Back

(a) Price (b) Sugar

(c) Soda

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Preference parameters and age Back

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Price effects Back

Effect of 1% price increase on:own cross demand for: total

demand sugary products diet products demand

Coca Cola 330 -2.182 0.141 0.057 0.013Coca Cola 500 -1.077 0.219 0.089 -0.064Coca Cola Diet 330 -2.033 0.047 0.153 0.015Coca Cola Diet 500 -0.916 0.073 0.269 -0.043Pepsi 330 -2.485 0.056 0.021 0.005Pepsi 500 -1.670 0.133 0.058 -0.035Pepsi Diet 330 -2.369 0.017 0.071 0.006Pepsi Diet 500 -1.412 0.047 0.161 -0.027Cherry Coke 330 -2.538 0.021 0.007 0.002Cherry Coke 500 -1.125 0.022 0.012 -0.008Cherry Coke Diet 500 -1.029 0.010 0.028 -0.005Oasis 500 -1.074 0.050 0.019 -0.018Oasis Diet 500 -0.975 0.015 0.044 -0.009

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Average effect of tax: % change in demand Back

Soda tax Sugary soda tax

Sugary soda -3.42 -5.78[-3.62, -3.24] [-6.16, -5.32]

Diet soda -2.60 3.53[-2.77, -2.40] [3.14, 3.79]

Sugary non-soda 5.72 4.95[4.36, 6.13] [4.02, 5.35]

Outside option 15.77 9.37[14.94, 16.55] [8.97, 9.82]

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Average effect of tax Back

Change following:soda tax sugary soda tax

% reduction sugar from soda -3.4% -5.8%[-3.6, -3.2] [-6.2, -5.3]

% reduction sugar from all drinks -2.5% -4.7%[-2.6, -2.4] [-4.9, -4.3]

Comp var per 100g sugar reduction £15.07 £4.51[14.24, 15.74] [4.25, 4.89]

Net comp var per 100g sugar reduction £0.24 £0.13[0.23, 0.24] [0.13, 0.14]

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Robustness: substitution to chocolate Back

I So far model of demand given purchase a drink

I Work in progress

I upper level substitution to sugar in non-drinks products (chocolate)

dW

dτ=

∑i

(φ′i − τ λ)|S′wi | −

∑i

φ′iS′nwi −

∑i

(λi − λ)Swi

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Robustness: substitution to chocolate Back

(a) Under 25 (b) 25-44 (c) 45-65

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Total sugar in diet by expenditure decilesBack

(a) US (b) UK

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Age by expenditure deciles Back

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