Revisiting Sugar Taxes and Sugary Drink Consumption: Evidence from the Random-Coefficient Demand Model

Marco A. Palma, Jacquelyn Zhang

    Research output: Contribution to journalArticle

    Abstract

    Berkeley's sugar tax policy is currently under intense scrutiny and debate, while similar tax policies are rapidly expanding to other U.S. states. Contrary to theoretical predictions and policy expectations, previous literature documents short-term evidence of increased consumption of sugary drinks in response to a sugar tax policy. We investigate the underlying mechanism behind this behavioral anomaly using the Berry, Levinsohn, and Pakes (BLP) random coefficient (RC) logit demand model in characteristic space. We find that the consumption increase is mainly driven by a change in the average valuation of the sugar content going from negative to positive following enactment of the sugar tax policy.
    Original languageEnglish
    Pages (from-to)37-55
    JournalJournal of Agricultural and Resource Economics
    Volume46
    Issue number1
    DOIs
    Publication statusPublished - 2021

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