Sugar-sweetened beverages tax and obesity: Simulation of economic impacts from input-output analysis for Brazil

Given the growing interest in taxing sugar-sweetened beverages, we estimated the effects of tax increase of sugary drinks for the Brazilian economy, focusing on the impact on household consumption, production,employment, and tax revenues of the government. To identify these effects, we considered productive relations of SSB sector by calculating the forward and backward indices and employment multipliers based on the input-output matrix of Brazil. Additionally, we performed two simulations. In the first simulation, we used the Leontief price model incorporating the disaggregation of household consumption vector by income decile an increase of 10% in the production cost of SSB due to a tax increase. The results show a tax increase appliedt o the sugary drink industry generates a slight negative impact on the economy, but it reaches the expected effect: reduction of household consumption for this product. The distributional analysis shows the tax is clearly progressive over the decision, when measured by the compensatory variation. In the second simulation we additionally assumed all revenue generated would be invested in public health. In this scenario, the positive effects on employment compensate the tax burden bringing positive aggregated effects on employment despite slightly negative effects on production.