November 28, 2018
CORE, room C 035
The Heterogeneous Impact of Sugar Taxes on Cola Demand across Different Household Types
Valerio Serse, UCL CORE
Sugar taxes are often considered as a possible tool to tackle excessive sugar consumption. Accounting for heterogeneity in preferences can be fundamental in order to assess whether these policies will be effective among the targeted population. This work estimates a multinomial Logit model of cola demand on a large set of consumer scanner data in order to test for both taste heterogeneity and inertia in product choice. The model estimates allows evaluating the effectiveness of taxation in reducing demand for sugary colas. The results indicates that households have very heterogeneous preferences for sugary colas, have different price sensitivity and exhibit inertia in cola choice. In particular, heavy sugar consumers tend to prefer sugary to diet colas but are less sensitive to prices. This suggests that although taxing sugary colas can be justified on public health grounds, this policy will not have a larger impact among the targeted population. Tax policy simulations indicate that excise taxes targeting sugar content should be preferred to ad-valorem taxes on sugary colas, as the latter would entail a larger substitution towards cheaper sugary colas. Lastly, because of inertia in cola choices, these taxes are more effective in reducing cola demand in the long-run.
Please fill the doodle by Tuesday Nov 27 at noon if you plan to attend and mention whether you would like a sandwich:
Looking forward to seeing you all in the seminar!