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

70 Pages Posted: 22 Jul 2018

See all articles by Di Xiang

Di Xiang

Southwestern University of Finance and Economics (SWUFE)

Lue Zhan

Independent

Massimo Bordignon

Universita Cattolica; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: June 06, 2018

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.

Keywords: sugar-sweetened beverage tax, obesity, household production

JEL Classification: D120, D130, I180

Suggested Citation

Xiang, Di and Zhan, Lue and Bordignon, Massimo, A Reconsideration of the Sugar Sweetened Beverage Tax in a Household Production Model (June 06, 2018). CESifo Working Paper Series No. 7087, Available at SSRN: https://ssrn.com/abstract=3214415 or http://dx.doi.org/10.2139/ssrn.3214415

Di Xiang

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Lue Zhan

Independent ( email )

Massimo Bordignon (Contact Author)

Universita Cattolica ( email )

20123 Milano
Italy
+39-2-5836-3300/1 (Phone)
+39-2-5836-3302 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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