The effects of taxes on purchases of sugar-sweetened carbonated soft drinks: a quantile regression approach

Geir Wæhler Gustavsen and Kyrre Rickertsen

Applied Economics, 2009, vol. 43, issue 6, 707-716

Abstract: The consumption of large quantities of Sugar-Sweetened Carbonated Soft Drinks (SSCSD) may lead to obesity, which is associated with health problems such as diabetes, cardiac diseases and mental health problems. The effects of increasing the Value Added Tax (VAT) on purchases of SSCSD are estimated. Obesity is more likely among heavy drinkers than among light or moderate drinkers. Therefore, the effects on high- and low-purchasing households are estimated by using Quantile Regressions (QRs) on Norwegian household purchase data. Since many households did not purchase SSCSD during each survey period, censored as well as ordinary QRs are used. Our results suggest that a VAT increase from 13 to 25% will have the highest percentage effect among low-purchasing households but the absolute effect is highest among high-purchasing households. Low-purchasing households will reduce their purchases by about 5 L while the reduction is almost 20 L among high-purchasing households. However, the effects among high-purchasing households are not statistically significant from zero. A reduction of 5 L corresponds ceteris paribus to an annual reduction of about 0.3 kg of body weight.

Date: 2009
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DOI: 10.1080/00036840802599776

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