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CRES Seminar - John Gibson (University of Waikato)

CRES Seminar - John Gibson (University of Waikato)

April 19th - 13h

04.04.2017

The ‘Soda Tax’ is Unlikely to Make Mexicans Lighter: New Evidence on Biases in Elasticities of Demand for Soda (with Mabel Andalón)

Abstract

Studies suggest that Mexico’s one peso per liter tax on sugar-sweetened drinks may cause a two to four pound fall in average weight, based on extant Mexican estimates of an own-price elasticity of quantity demand for soda of between −1.0 and −1.3. These elasticity estimates ignore consumer responses on the quality margin and also are biased by correlated measurement errors. To show these biases we combine Mexican household budget survey data for 2014 with city-level soda price data to estimate unrestricted demand models that allow consumer responses on both the quality and quantity margins. If methods from previous Mexican studies are used, the own-price elasticity of quantity demand for soda is between −1.2 and −1.3 but is just −0.2 to −0.3 if more appropriate methods are used. If the corrected elasticities are used, tax-induced soda price increases might cause weight reductions of less than one pound, which is too small to make much difference to health.

Biography

John Gibson is Professor in the Department of Economics, University of Waikato. He taught previously at the University of Canterbury, and the Economics Department and Center for Development Economics at Williams College. Since receiving his Ph.D. from Stanford University he has worked in the following countries: Cambodia, China, Fiji, India, Papua New Guinea, Russia, Samoa, Solomon Islands, Thailand, Tonga, Vanuatu, and Vietnam. His recent publications have appeared in the Economic Journal, Review of Economics and Statistics, Journal of Development Economics, World Bank Economic Review, and Health Economics.

http://voxeu.org/users/johngibson0

 

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