Do prices and purchases respond similarly to soft drink tax increases and cuts?

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Do prices and purchases respond similarly to soft drink tax increases and cuts? / Schmacker, Renke; Smed, Sinne.

In: Economics and Human Biology, Vol. 37, 100864, 05.2020.

Research output: Contribution to journalJournal articleResearchpeer-review

Harvard

Schmacker, R & Smed, S 2020, 'Do prices and purchases respond similarly to soft drink tax increases and cuts?', Economics and Human Biology, vol. 37, 100864. https://doi.org/10.1016/j.ehb.2020.100864

APA

Schmacker, R., & Smed, S. (2020). Do prices and purchases respond similarly to soft drink tax increases and cuts? Economics and Human Biology, 37, [100864]. https://doi.org/10.1016/j.ehb.2020.100864

Vancouver

Schmacker R, Smed S. Do prices and purchases respond similarly to soft drink tax increases and cuts? Economics and Human Biology. 2020 May;37. 100864. https://doi.org/10.1016/j.ehb.2020.100864

Author

Schmacker, Renke ; Smed, Sinne. / Do prices and purchases respond similarly to soft drink tax increases and cuts?. In: Economics and Human Biology. 2020 ; Vol. 37.

Bibtex

@article{5df01e8a69f34d84a55b4a9e63273095,
title = "Do prices and purchases respond similarly to soft drink tax increases and cuts?",
abstract = "While in January 2012, Denmark increased the long-standing tax on sugary soft drinks, the tax was cut by half in July 2013 and then completely repealed in January 2014. In this study, we examine whether increases and cuts of the soft drink tax lead to similar over- or under-shifting to prices and to similar demand responses. We use longitudinal scanner data of 1,282 Danish households to estimate within-product changes in prices and within-household changes in purchase quantity. The tax hike was overshifted by a factor of 1.6–1.8, while the tax repeal was fully passed through with a factor of 0.9–1.2. On average, consumption was 13.4 percent lower the year after the tax increase compared to the year before. The repeal of the tax was associated with an increase in purchase quantity of 31.0 percent. This is equivalent to price elasticities of −1.3 for both tax hikes and cuts. The results suggest that consumers react similarly to tax cuts compared to tax increases. Furthermore, the increase in purchases following a tax cut has no limiting effect on purchases of other beverages suggesting an increase in the intake of calories. This might have implications for health in countries that consider repealing current taxes on soft drinks.",
keywords = "Pass-through rates, Policy evaluation, Purchase changes, Soda tax, Soft drink tax, Tax repeal",
author = "Renke Schmacker and Sinne Smed",
year = "2020",
month = "5",
doi = "10.1016/j.ehb.2020.100864",
language = "English",
volume = "37",
journal = "Economics and Human Biology",
issn = "1570-677X",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Do prices and purchases respond similarly to soft drink tax increases and cuts?

AU - Schmacker, Renke

AU - Smed, Sinne

PY - 2020/5

Y1 - 2020/5

N2 - While in January 2012, Denmark increased the long-standing tax on sugary soft drinks, the tax was cut by half in July 2013 and then completely repealed in January 2014. In this study, we examine whether increases and cuts of the soft drink tax lead to similar over- or under-shifting to prices and to similar demand responses. We use longitudinal scanner data of 1,282 Danish households to estimate within-product changes in prices and within-household changes in purchase quantity. The tax hike was overshifted by a factor of 1.6–1.8, while the tax repeal was fully passed through with a factor of 0.9–1.2. On average, consumption was 13.4 percent lower the year after the tax increase compared to the year before. The repeal of the tax was associated with an increase in purchase quantity of 31.0 percent. This is equivalent to price elasticities of −1.3 for both tax hikes and cuts. The results suggest that consumers react similarly to tax cuts compared to tax increases. Furthermore, the increase in purchases following a tax cut has no limiting effect on purchases of other beverages suggesting an increase in the intake of calories. This might have implications for health in countries that consider repealing current taxes on soft drinks.

AB - While in January 2012, Denmark increased the long-standing tax on sugary soft drinks, the tax was cut by half in July 2013 and then completely repealed in January 2014. In this study, we examine whether increases and cuts of the soft drink tax lead to similar over- or under-shifting to prices and to similar demand responses. We use longitudinal scanner data of 1,282 Danish households to estimate within-product changes in prices and within-household changes in purchase quantity. The tax hike was overshifted by a factor of 1.6–1.8, while the tax repeal was fully passed through with a factor of 0.9–1.2. On average, consumption was 13.4 percent lower the year after the tax increase compared to the year before. The repeal of the tax was associated with an increase in purchase quantity of 31.0 percent. This is equivalent to price elasticities of −1.3 for both tax hikes and cuts. The results suggest that consumers react similarly to tax cuts compared to tax increases. Furthermore, the increase in purchases following a tax cut has no limiting effect on purchases of other beverages suggesting an increase in the intake of calories. This might have implications for health in countries that consider repealing current taxes on soft drinks.

KW - Pass-through rates

KW - Policy evaluation

KW - Purchase changes

KW - Soda tax

KW - Soft drink tax

KW - Tax repeal

U2 - 10.1016/j.ehb.2020.100864

DO - 10.1016/j.ehb.2020.100864

M3 - Journal article

C2 - 32145515

AN - SCOPUS:85080141017

VL - 37

JO - Economics and Human Biology

JF - Economics and Human Biology

SN - 1570-677X

M1 - 100864

ER -

ID: 241099411