Putting a Tax on Sugary Drinks - New AAEA Member Research

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People in one major city to pay up for pop, but will laws like this curb consumption?

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“People who need to curb their consumption are less impacted by sales tax than people who don’t need to drink less soda.”

Just this month the city of Philadelphia, Pennsylvania, passed a controversial 1.5-cents-per-ounce tax on sugar-added and artificially-sweetened soft drinks. That will add an extra dollar to the price of a six-pack or two-liter bottle of soda.

The money generated will go towards childhood education, but supporters of “soda taxes” across the country are hoping the increased price will also help curb the growing obesity epidemic.

Will it work, or are there other factors getting in the way? That’s the focus of “Heterogeneous Behavior, Obesity and Storability in the Demand for Soft Drinks,” authored by Emily Wang of the University of Massachusetts Amherst and recently selected for publication in the American Journal of Agricultural Economics.

“We were able to take into account differing populations and also look at the role of temporary price reductions (sales),” Wang said. “People who need to curb their consumption are less impacted by sales tax than people who don’t need to drink less soda.”

Not only do Wang and her co-authors examine the health concerns, but they also look into how the next big sale on soda at your local grocery store factor into the tax impact.

To access this paper, or to schedule an interview with Dr. Wang, please contact Jay Saunders in the AAEA business office.

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Jay Saunders
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