Soda Taxes and the Prices of Sodas and Other Drinks: Evidence from Mexico

36 Pages Posted: 26 May 2015

See all articles by Jeffrey Grogger

Jeffrey Grogger

University of Chicago - Harris School of Public Policy; National Bureau of Economic Research (NBER)

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Date Written: May 2015

Abstract

To combat a growing obesity problem, Mexico imposed a nationwide tax on drinks with added sugar, popularly referred to as a “soda tax,” effective January 2014. I analyze data on taxed and untaxed products collected as part of Mexico’s Consumer Price Index program to estimate how prices responded to the tax. Prices of regular sodas jumped by more than the amount of the tax in the month that the tax took effect. The prices of other taxed drinks also rose, though by a smaller amount. Diet soda prices rose as well, suggesting that consumers may have substituted toward diet sodas after regular sodas became taxable. The prices of bottled water, pure (untaxed) juices, and milk were largely unchanged. A companion analysis of untaxed comparison products showed no general price increases around the time that the soda tax was imposed.

Suggested Citation

Grogger, Jeffrey T., Soda Taxes and the Prices of Sodas and Other Drinks: Evidence from Mexico (May 2015). NBER Working Paper No. w21197. Available at SSRN: https://ssrn.com/abstract=2610494

Jeffrey T. Grogger (Contact Author)

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