Consumption Responses to an Unpopular Policy: Evidence from a Short-lived Soda Tax

57 Pages Posted: 23 Feb 2021 Last revised: 24 Jun 2022

See all articles by Andrew T. Ching

Andrew T. Ching

Johns Hopkins University - Carey Business School

Daniel Goetz

Rotman School of Management

Date Written: February 28, 2021

Abstract

Public policies that intervene or restrict consumer choices are often controversial. For instance, the compliance rate of COVID-19 pandemic social distancing rules varied dramatically across cities and states, and these policies even backfired among some consumers who strongly disagreed with them. Motivated by these controversies, we investigate whether such rebellion behavior happens in the context of a soda tax. More specifically, we hypothesize that tax opponents will decrease their soda consumption by more than tax supporters, in order to avoid the tax burden. We combine detailed voting records with price and quantity data from over a thousand grocery stores, and show that in response to the short-lived Washington State soda tax, stores frequented by tax opponents experience a 60% greater reduction in quantity sold of taxed beverages compared to stores frequented by tax supporters, even though the tax pass-through is uniform across all stores. Our estimation results show that demand for soda at tax opponents' stores shifts inwards and becomes less elastic, supporting the behavioral hypothesis that consumer disagreement with this policy induces tax avoidance.

Keywords: Behavioral Economics, Policy Evaluation, Soda Tax, Fairness, Political Process

JEL Classification: D63, D72, D91, H26, I14, I18, L81

Suggested Citation

Ching, Andrew T. and Goetz, Daniel, Consumption Responses to an Unpopular Policy: Evidence from a Short-lived Soda Tax (February 28, 2021). Rotman School of Management Working Paper No. 3789296, Available at SSRN: https://ssrn.com/abstract=3789296 or http://dx.doi.org/10.2139/ssrn.3789296

Andrew T. Ching

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Daniel Goetz (Contact Author)

Rotman School of Management ( email )

United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
132
Abstract Views
599
rank
295,602
PlumX Metrics