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The impact of the Oakland SSB tax on prices and volume sold: A study of intended and unintended consequences

Pierre Thomas Léger and Lisa M. Powell

Health Economics, 2021, vol. 30, issue 8, 1745-1771

Abstract: We examine the effects of a sugar‐sweetened beverage (SSB) tax that took effect in Oakland, California in 2017. Using rich customized universal product code ‐level data, we estimate the effect of the SSB tax on prices and volume in the short to medium term in a difference‐in‐differences framework. We pay particular attention to tax‐avoidance strategies that may minimize the policy's intended effect including: (i) transfers to SSBs to the nontaxed border area (i.e., cross‐border shopping), (ii) a move from high‐priced per ounce single serve to their cheaper multipacks or larger format counterparts (i.e., format switching), and (iii) a move from high‐priced beverages to less expensive ones within a category and format (i.e., brand switching). We find that the year‐over‐year tax pass‐through is 49%. We find that volume sold of taxed beverages fell by 14%, but 46% of this decrease is offset with an increase in the border area. We also find evidence of substitution to lower‐priced taxed beverages but no evidence of switching to cheaper formats. Finally, we find important dynamic effects with respect to tax pass‐through, volume sold and cross‐border shopping.

Date: 2021
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