Selection Effects and Heterogeneous Demand Responses to the Berkeley Soda Tax Vote

Early evidence from household-level surveys suggests that the one-cent-per-ounce tax on sugar-sweetened beverages that took effect on March 1, 2015, in Berkeley, California, has decreased consumption of sugar-sweetened beverages dramatically. Even if these findings are robust, the public policy implications of expanding the Berkeley soda tax policy to a national level are complicated by selection effects inherent in the populations of both voters and consumers. We find that consumption responses related to the tax interact nontrivially with consumer heterogeneity. Some of these responses directly counter the public policy goals of a soda tax. For example, high-consuming households are less price sensitive and therefore less responsive to price changes following a tax. Further, “reactance” among high-consuming populations led to increases in soda consumption immediately following the passage of the tax, partially mitigating reductions in soda consumption.