Working Paper: NBER ID: w21197
Authors: Jeffrey Grogger
Abstract: To combat a growing obesity problem, Mexico imposed a nationwide tax on drinks with added sugar, popularly referred to as a “soda tax,” effective January 2014. I analyze data on taxed and untaxed products collected as part of Mexico’s Consumer Price Index program to estimate how prices responded to the tax. Prices of regular sodas jumped by more than the amount of the tax in the month that the tax took effect. The prices of other taxed drinks also rose, though by a smaller amount. Diet soda prices rose as well, suggesting that consumers may have substituted toward diet sodas after regular sodas became taxable. The prices of bottled water, pure (untaxed) juices, and milk were largely unchanged. A companion analysis of untaxed comparison products showed no general price increases around the time that the soda tax was imposed.
Keywords: soda tax; prices; Mexico; obesity; consumer behavior
JEL Codes: H21; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Soda Tax (H29) | Regular Soda Prices (D49) |
| Soda Tax (H29) | Prices of Other Taxed Drinks (H29) |
| Regular Soda Prices (D49) | Diet Soda Prices (P22) |
| Soda Tax (H29) | Prices of Untaxed Beverages (L66) |