Individual preference heterogeneity, targeting and welfare effects of soda taxes

Abstract

Soda taxes aim to reduce excessive sugar consumption. Their effectiveness depends on whether they successfully target those whose overconsumption is the highest. We assess the impact of soda taxes using novel longitudinal data on purchases on-the-go allowing for multidimensional heterogeneity and taking account of the supply side equilibrium pass-through. We recover individual level responses, which we relate to markers of the likely harm to the individual from sugar consumption. We show that soda taxes are relatively well targeted at the young; young individuals switch relatively strongly away from sugar. We evaluate the welfare and redistributive properties of the tax.