Soda Taxes and the Prices of Sodas and Other Drinks: Evidence from Mexico
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.
I thank Paul Li, Ursina Schaede, and Alex Warofka for excellent research assistance. Any errors are the author’s. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Jeffrey Grogger, 2017. "Soda Taxes And The Prices of Sodas And Other Drinks: Evidence From Mexico," American Journal of Agricultural Economics, vol 99(2), pages 481-498. citation courtesy of