IDEAS home Printed from https://ideas.repec.org/a/zbw/espost/234152.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/234152/1/sugar_tax_joint_paper_accepted.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    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.
    2. Showalter, M.H., 1998. "The effect of cigarette taxes on cigarette consumption," American Journal of Public Health, American Public Health Association, vol. 88(7), pages 1118-1119.
    3. Bonnet, Céline & Requillart, Vincent, 2010. "Is The Eu Sugar Policy Reform Likely To Increase Obesity?," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116414, European Association of Agricultural Economists.
    4. Oliver Morrissey & Christian Von Haldenwang & Armin Von Schiller & Maksym Ivanyna & Ingo Bordon, 2016. "Tax Revenue Performance and Vulnerability in Developing Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 52(12), pages 1689-1703, December.
    5. Lesley Chiou & Erich Muehlegger, 2014. "Consumer Response to Cigarette Excise Tax Changes," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(3), pages 621-650, September.
    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.
    8. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 157-178, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    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.
    2. Muhammad Salar Khan & Paul N. Thompson & Victor J. Tremblay, 2020. "Marijuana tax incidence, stockpiling, and cross-border substitution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(1), pages 103-127, February.
    3. Gračner, Tadeja & Kapinos, Kandice A. & Gertler, Paul J., 2022. "Associations of a national tax on non-essential high calorie foods with changes in consumer prices," Food Policy, Elsevier, vol. 106(C).
    4. Panayiota Lyssiotou & Elena Savva, 2021. "Who pays taxes on basic foodstuffs? Evidence from broadening the VAT base," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(1), pages 212-247, February.
    5. Raymundo M. Campos-Vázquez & Eduardo M. Medina-Cortina, 2019. "Pass-through and competition: the impact of soft drink taxes as seen through Mexican supermarkets," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-23, December.
    6. Pierre Dubois & Rachel Griffith & Martin O'Connell, 2020. "How Well Targeted Are Soda Taxes?," American Economic Review, American Economic Association, vol. 110(11), pages 3661-3704, November.
    7. Hyunchul Kim & Dongwon Lee, 2021. "Racial demographics and cigarette tax shifting: evidence from scanner data," Empirical Economics, Springer, vol. 61(2), pages 1011-1037, August.
    8. John Cawley & Chelsea Crain & David Frisvold & David Jones, 2018. "The Pass-Through of the Largest Tax on Sugar-Sweetened Beverages: The Case of Boulder, Colorado," NBER Working Papers 25050, National Bureau of Economic Research, Inc.
    9. Dora Benedek & Ruud A. Mooij & Michael Keen & Philippe Wingender, 2020. "Varieties of VAT pass through," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 890-930, August.
    10. M Arantxa Colchero & Juan Carlos Salgado & Mishel Unar-Munguía & Mariana Molina & Shuwen Ng & Juan Angel Rivera-Dommarco, 2015. "Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas," PLOS ONE, Public Library of Science, vol. 10(12), pages 1-11, December.
    11. John Cawley & David Frisvold & David Jones & Chelsea Lensing, 2021. "The Pass‐Through of a Tax on Sugar‐Sweetened Beverages in Boulder, Colorado," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(3), pages 987-1005, May.
    12. Liran Einav & Dan Knoepfle & Jonathan Levin & Neel Sundaresan, 2014. "Sales Taxes and Internet Commerce," American Economic Review, American Economic Association, vol. 104(1), pages 1-26, January.
    13. Anderson, Simon P. & de Palma, Andre & Kreider, Brent, 2001. "Tax incidence in differentiated product oligopoly," Journal of Public Economics, Elsevier, vol. 81(2), pages 173-192, August.
    14. Clément Carbonnier, 2005. "Is Tax Shifting Asymmetric? Evidence from French VAT reforms, 1995-2000," Working Papers halshs-00590719, HAL.
    15. Cheng-Yih Hong & Yi-Chi Tsai & Tsai- Rong Lee & Hui-Wen Dang, 2018. "Tax Rate Adjustment and Its Potential Impact on Price: An Application Mathematical Input-Output Price Spillover Model," International Journal of Economics and Financial Issues, Econjournals, vol. 8(5), pages 21-25.
    16. Snir, Avichai & Levy, Daniel, 2021. "If You Think 9-Ending Prices Are Low, Think Again," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(1 (Forthc).
    17. Kazuki Onji, 2009. "A tale of pork prices : evasion and attenuation of a Japanese tariff," Trade Working Papers 22883, East Asian Bureau of Economic Research.
    18. Francesca Parodi, 2024. "Consumption Tax Cuts In A Recession," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 117-148, February.
    19. Rachel Griffith & Lars Nesheim & Martin O'Connell, 2018. "Income effects and the welfare consequences of tax in differentiated product oligopoly," Quantitative Economics, Econometric Society, vol. 9(1), pages 305-341, March.
    20. Kadner-Graziano, Alessandro S., 2023. "Mergers of Complements: On the Absence of Consumer Benefits," International Journal of Industrial Organization, Elsevier, vol. 89(C).

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:espost:234152. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zbwkide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.