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Efficient taxation of sugar‐sweetened beverages and missing markets for sugar content

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  • Thomas Eichner
  • Marco Runkel

Abstract

This paper identifies missing markets for the sugar content of sugar‐sweetened beverages (SSBs) as a novel foundation of soft drink taxation. If the social marginal value of sugar content is negative, then missing price signals imply an inefficiently high sugar content. Efficiency is restored with a tax on the sugar content per unit of the SSB, augmented by a subsidy on the SSB. In an empirical calibration to the UK, the optimal SSB subsidy is small, whereas the optimal sugar content tax is £0.38 per liter and, thus, one and a half to two times larger than the tax rates implemented by the UK's soft drink levy.

Suggested Citation

  • Thomas Eichner & Marco Runkel, 2025. "Efficient taxation of sugar‐sweetened beverages and missing markets for sugar content," Scandinavian Journal of Economics, Wiley Blackwell, vol. 127(3), pages 576-612, July.
    • Handle: RePEc:bla:scandj:v:127:y:2025:i:3:p:576-612
    DOI: 10.1111/sjoe.12585
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