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The effects of taxing sugar-sweetened beverages in Ecuador: An analysis across different income and consumption groups

Joselin Segovia, Mercy Orellana, Juan Pablo Sarmiento and Darwin Carchi

PLOS ONE, 2020, vol. 15, issue 10, 1-18

Abstract: To analyze the effects of taxing sugar-sweetened beverages (SSBs) in Ecuador, this study estimates a Quadratic Almost Ideal Demand System model using data from the 2011–2012 National Survey of Income and Expenditure for Urban and Rural Households. We derive own- and cross-price elasticities by income quintiles and consumption deciles for five beverages, including two types of sugary drink: (i) milk, (ii) soft drinks, (iii) water, (iv) other sugary drinks, and (v) coffee and tea. Overall, results show that a 20% increase in the price of SSBs will decrease the consumption of soft drinks and other sugary drinks by 27% and 22%, respectively. Heterogeneous consumer behavior is revealed across income and consumption groups, as well as policy-relevant complementarity and substitution patterns. Policy impacts are simulated by considering an 18 cents per liter tax, implemented in Ecuador, and an ad-valorem 20% tax on the price. Estimated tax revenues and weight loss are larger for the latter. From a health perspective, high-income and heavy consumer households would benefit the most from this policy. Our study supports an evidence-based debate on how to correctly design and monitor food policy.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0240546

DOI: 10.1371/journal.pone.0240546

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