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Understanding the effect of a Soft Drinks Industry Levy on Consumer Well-Being in the UK: First Estimates

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  • Fage, Bradley
  • Vasilev, Aleksandar

Abstract

This paper is a first attempt to provide a quantitative evaluation of consumer well-being resulting from the UK Soft Drinks Industry Levy introduced in April 2018. Using a model setup that encompasses both a normal case and a Giffen case for sugary drinks consumption, a computational exercise is performed to quantify the welfare social loss for a variety of household incomes. The model demonstrates that the introduction of a soft drinks levy results in a non-trivial welfare loss, particularly in terms of monetary value and weight effect. We also find that the wealthiest individuals in society are affected positively by this levy, whilst the poorest segment of the population are adversely affected, especially in the presence of a binding nutritional constraint.

Suggested Citation

  • Fage, Bradley & Vasilev, Aleksandar, 2021. "Understanding the effect of a Soft Drinks Industry Levy on Consumer Well-Being in the UK: First Estimates," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
  • Handle: RePEc:zbw:espost:234152
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    References listed on IDEAS

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    1. Nicoletta Berardi & Patrick Sevestre & Marine Tépaut & Alexandre Vigneron, 2016. "The impact of a ‘soda tax’ on prices: evidence from French micro data," Applied Economics, Taylor & Francis Journals, vol. 48(41), pages 3976-3994, September.
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    6. Hunt Allcott & Benjamin B. Lockwood & Dmitry Taubinsky, 2019. "Should We Tax Sugar-Sweetened Beverages? An Overview of Theory and Evidence," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 202-227, Summer.
    7. Vasilev, Aleksandar, 2015. "The welfare effect of flat income tax reform: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 53(3), pages 205-220.
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    Cited by:

    1. Rohanaraj Thangarasa Tiburtrious Andrew, 2023. "The Purchase Behaviour Towards Consumer Goods During Economic Crisis – A Middle Eastern Perspective," Economics, Sciendo, vol. 11(1), pages 85-106, June.

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    More about this item

    Keywords

    Soda tax; sugary drinks; Giffen goods; nutritional constraint; welfare social loss;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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