Abstract
We estimate the price and consumption effects of the 2012 French tax on sweetened non-alcoholic drinks using a difference-in-difference approach. Our identification strategy exploits Italian data as a natural control group. We use French and Italian Consumer Price Indices, purchase prices and quantities from the 2011 and 2012 Kantar and GfK home-scan surveys for two French regions and two neighbouring Italian regions, and expenditure data from the 2011 and 2012 Italian Expenditure Survey. We check for the robustness of our results by applying the difference-in-difference models using only French data and considering water as the benchmark (control) good. We find that the tax is transmitted to the prices of taxed drinks, with full transmission for soft drinks and partial transmission for fruit juices. The evidence on purchase responses is mixed and less robust, indicating at most a very small reduction in soft drink purchases (about half a litre per capita per year), an impact which would be consistent with the low tax rate. We find suggestive evidence of a larger response by the sub-sample of heavy purchasers. Fruit juices and water do not seem to have been affected by the tax.
Highlights
Taxation of sweetened beverages as a mean to reduce the risk of excess weight and non-communicable diseases, especially in children, has been a key component of nutrition policies for many governments over the last decade
Considering only the window between 2011 and 2012, the estimated effect of the tax on Consumer Price Indices (CPIs) for soft drinks is a 5.6% increase, and the corresponding estimate using Home Scan Panel (HSP) weekly regional prices s 4.7%
When the time window is expanded to include 5 years before and after the tax introduction, the application of the difference-in-difference model to CPI data returns a larger impact on soft drink prices (+8.2%) and there is evidence of significant transmission to fruit juice prices (+4.2%)
Summary
Taxation of sweetened beverages as a mean to reduce the risk of excess weight and non-communicable diseases, especially in children, has been a key component of nutrition policies for many governments over the last decade. The ex post empirical evidence on the effectiveness of these taxes is still limited. We evaluate the impact of a tax on sweetened non-alcoholic drinks introduced in France in January 2012, and we provide quasi-experimental evidence on its effect on prices and purchased quantities. Taxation of soft drinks dates back to 1933, when California introduced a 7% sales tax. Outside the US, with some exceptions (e.g. Scandinavian countries), the implementation of the so-called soda taxes has spread only in recent years. According to the Nourishing data-base regularly updated by the World Cancer Research Fund, 31 national governments have enacted soda taxes between 2011
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