Sin taxes and self-control

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According to theory, “sin taxes” are welfare improving if consumers with low self-control respond at least as much to the tax as consumers with high self-control. We investigate empirically if demand response to soft drink and fat tax variations in Denmark depends on consumers’ self-control. We use a unique home-scan panel that includes a survey measure of self-control. When taxes increase, consumers with low self-control reduce purchases less strongly than consumers with high self-control. When taxes decrease, both groups increase their purchases similarly. The results show an asymmetry in price elasticities by self-control that is more pronounced when taxes increase.

Original languageEnglish
JournalAmerican Economic Journal: Economic Policy
Issue number3
Pages (from-to)1-34
Number of pages34
Publication statusPublished - 2023

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© (2023), (American Economic Association). All Rights Reserved.

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