Partial versus General Equilibrium Calorie and Revenue Effects Associated with a Sugar-Sweetened Beverage Tax Academic Article

Copyright 2014 Western Agricultural Economics Association. Taxes on sugar-sweetened beverages have been widely proposed to combat the U.S. obesity crisis. Most previous work has found the effects of a SSB tax to be small to moderate. We address three limitations. First, we incorporate the supply side via a stochastic equilibrium displacement model. Second, we account for uncertainty in the underlying elasticities using probability distributions associated with elasticities. Third, we address industry revenue effects. We find that assumptions about the supply side are more important than assumptions about substitution. Ignoring supply side severely overestimates quantity and calorie effects and slightly underestimates revenue effects.

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