Journal
AMERICAN JOURNAL OF AGRICULTURAL ECONOMICS
Volume 93, Issue 1, Pages 175-193Publisher
WILEY
DOI: 10.1093/ajae/aaq155
Keywords
habit formation; sugar-sweetened beverage tax; obesity; D12
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Funding
- USDA [59-5000-7-0117]
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Using scanner data, we estimated demand for nine nonalcoholic beverages under habit formation. We found strong evidence for habit formation. Although demand for sugar-sweetened beverages by low-income households is less elastic to own-price changes compared with high-income households, there is evidence that high-income households consider beverages to be more substitutable than low-income households do. A half-cent per ounce tax on store-purchased sugar-sweetened beverages will result in a moderate reduction in consumption of sugar-sweetened beverages for both income strata. Because of habit formation, long-run national tax revenue from a sugar-sweetened beverage tax is about 15 to 20% lower than short-run revenue.
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