Working Paper: NBER ID: w21465
Authors: John Cawley; David Frisvold
Abstract: Obesity and diet-related chronic disease are increasing problems worldwide. In response, many governments have enacted or are considering taxes on energy-dense foods. Perhaps the most commonly-recommended policy is a tax on sugar-sweetened beverages (SSBs). \n\nThis paper estimates the extent to which a tax on SSBs is passed through to consumers in the form of higher prices. We examine the first city-level tax on SSBs in the U.S., which was enacted by the voters of Berkeley, California in November, 2014. We collected the prices of various brands and sizes of SSBs and other beverages before and after the implementation of the tax from a near-census of convenience stores and supermarkets in Berkeley, California. We also collected prices from stores in a control city: San Francisco, where in a similar voter referendum failed despite majority support.\n\nEstimates from difference-in-differences models indicate that, across all brands and sizes of products examined, 43.1 percent (95 percent confidence interval: 27.7 percent - 58.4 percent) of the Berkeley tax was passed on to consumers. The estimates also are consistent with cross-border shopping. For each mile of distance between the store and the closest store selling untaxed SSBs, pass-through rose 33.3 percent for 2-liter bottles and 25.8 percent for 12-packs of 12-ounce cans.
Keywords: Sugarsweetened beverages; Tax incidence; Public health; Obesity; Economics
JEL Codes: H20; H22; H71; I10; I12; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Berkeley SSB tax (H29) | retail prices (D49) |
| Berkeley SSB tax (H29) | price of a 20 oz bottle of Coke (L66) |
| price of a 20 oz bottle of Coke (L66) | pass-through rate (E43) |
| Berkeley SSB tax (H29) | price of 2-liter bottles of Coke (P22) |
| price of 2-liter bottles of Coke (P22) | pass-through rate (E43) |
| Berkeley SSB tax (H29) | price of 12-packs of Coke (L66) |
| price of 12-packs of Coke (L66) | pass-through rate (E43) |
| distance from nearest untaxed store (H73) | pass-through rate for 2-liter bottles (L66) |
| distance from nearest untaxed store (H73) | pass-through rate for 12-packs of cans (L66) |