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The effect of a soft drink tax in Mexico: evidence from time-series industry data

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  • Arteaga, Julio C.
  • Flores, Daniel
  • Luna, Edgar

Abstract

We use a time-series approach and industry data to estimate the effect on consumption of a relatively large excise tax on soft drinks imposed recently in Mexico. The tax caused a price increase of 12.8 per cent and reduced per-capita consumption about 3.8 per cent. This effect is small in comparison with the effects that are suggested by most studies that estimate price elasticities using an almost ideal demand system and household survey data. Moreover, we find that the effects of the tax on consumption vary throughout the year. The effect of the tax tends to be higher in the winter but vanishes during the summer. We also find that the effect of the tax does not vary from one year to another.

Suggested Citation

  • Arteaga, Julio C. & Flores, Daniel & Luna, Edgar, 2020. "The effect of a soft drink tax in Mexico: evidence from time-series industry data," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(02), January.
    • Handle: RePEc:ags:aareaj:342957
    DOI: 10.22004/ag.econ.342957
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    Cited by:

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    3. Nuño Ledesma José G. & Wu Steven Y. & Balagtas Joseph V., 2022. "Nonlinear Pricing Under Regulation: Comparing Cap Rules and Taxes in the Laboratory," Working Papers 2022-10, Banco de México.

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    More about this item

    Keywords

    Consumer/Household Economics; Demand and Price Analysis;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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