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A Reconsideration of the Sugar Sweetened Beverage Tax in a Household Production Model

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  • Di Xiang
  • Lue Zhan
  • Massimo Bordignon

Abstract

We study the impact of a hypothetical tax on sugar - sweetened beverages (SSBs) on the US households’ nutrients purchase, welfare change, and health benefit. Differently from the traditional approach, Food at Home(FAH) is here defined as a “home” good instead than a market good and consumers’ demands derived under the assumption that households maximize utility subject to both a money and a time constraint. The model is estimated by using an incomplete approximate Exact Affine Stone Index (EASI) demand system on a data set built by merging the most recent waves of the US consumer expenditure and time use surveys. Results show that a SSB tax would be much more effective in decreasing household nutrients purchase than it would appear by estimating a model neglecting time costs in home food production. A tax induced increased in SSB price by 20% is predicted to decrease the per capita energy purchase by 29.17 kcal/day. The annual health benefits of the tax, measured only in terms of reduced household medical expenditure, would overcome estimated welfare losses by more than $400 million.

Suggested Citation

  • Di Xiang & Lue Zhan & Massimo Bordignon, 2018. "A Reconsideration of the Sugar Sweetened Beverage Tax in a Household Production Model," CESifo Working Paper Series 7087, CESifo.
  • Handle: RePEc:ces:ceswps:_7087
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    Keywords

    sugar-sweetened beverage tax; obesity; household production;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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