Soft drink consumption, soda tax and socioeconomic demographics among six u.s. cities

Background

Consumption of soft drinks has been linked to obesity and poor health. Some U.S. states and cities started to levy special tax on soft drinks and to ban sales of large-sized sodas. Previous studies have examined the impact of soda taxes on soft drink consumption; but findings have been mixed. This situation has resulted in an intense debate whether the current taxes are effective or higher taxes are needed. Most of these studies are conducted at the state or national level. To our knowledge, there are no city-level studies.

Objective

Our study estimates own and cross-price elasticities for soft drinks and other beverages, as well as the impact of soda taxes and socioeconomic demographics on the consumption of soft drinks in six U.S. cities.

Methods

We used USDA's Quarterly Food-at-Home Price Database and data from the US Census Bureau's American Community Survey to estimate price elasticities for six U.S. cities. We adopted the Linear Approximated Almost Ideal Demand System (LA/AIDS) model and included eight non-alcoholic beverage groups.

Results

Our study shows that soft drink price elasticity varies significantly among the six cities. These values fall between the ranges of previous studies at the national level. Our study also illustrates that soft drink price elasticity is more sensitive to poverty rates and education attainments than soda taxes.

Conclusion

Heterogeneity in price responsiveness indicates that more studies on soft drink consumption and taxation at smaller geographic levels are warranted to provide a better understanding of how pricing policy will influence consumption.