Predicting the Effects of Sugar-Sweetened Beverage Taxes on Food and Beverage Demand in a Large Demand System

Chen Zhen, Eric A. Finkelstein, James M. Nonnemaker, Shawn A. Karns and Jessica Todd

American Journal of Agricultural Economics, 2014, vol. 96, issue 1, 1-25

Abstract: A censored Exact Affine Stone Index incomplete demand system is estimated for 23 packaged foods and beverages and a numéraire good. Instrumental variables are used to control for endogenous prices. A half-cent per ounce increase in sugar-sweetened beverage prices is predicted to reduce total calories from the 23 foods and beverages but increase sodium and fat intakes as a result of product substitution. The predicted decline in calories is larger for low-income households than for high-income households, although welfare loss is also higher for low-income households. Neglecting price endogeneity or estimating a conditional demand model significantly overestimates the calorie reduction.

Date: 2014
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