Efficient taxation of sugar‐sweetened beverages and missing markets for sugar content

Thomas Eichner and Marco Runkel

Scandinavian Journal of Economics, 2025, vol. 127, issue 3, 576-612

Abstract: This paper identifies missing markets for the sugar content of sugar‐sweetened beverages (SSBs) as a novel foundation of soft drink taxation. If the social marginal value of sugar content is negative, then missing price signals imply an inefficiently high sugar content. Efficiency is restored with a tax on the sugar content per unit of the SSB, augmented by a subsidy on the SSB. In an empirical calibration to the UK, the optimal SSB subsidy is small, whereas the optimal sugar content tax is £0.38 per liter and, thus, one and a half to two times larger than the tax rates implemented by the UK's soft drink levy.

Date: 2025
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https://doi.org/10.1111/sjoe.12585

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Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:127:y:2025:i:3:p:576-612

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