The impact of the French soda tax on prices, purchases and tastes: an ex post evaluation

Abstract

(with Sara Capacci, Olivier Allais, and Celine Bonnet) We evaluate the ex-post effects of the tax on sweetened non-alcoholic drinks introduced in France in January 2012. The evaluation is based on a natural experiment, using household purchase data drawn from home scan consumer data from two French regions, and two neighboring Italian regions over the twelve months preceding and following the enforcement of the tax. We adopt a Difference-in-Difference model, allowing for fixed household and time effects to estimate the impact of the tax on aver- age prices paid by consumers and purchased quantities for a set of non- alcoholic drink categories. We also explore whether the policy is consis- tent with a change in consumer tastes, intended as average demand when prices and total drink expenditure are held constant. Our results suggest a relatively small impact of the tax on prices with an uneven pass-through across the various drink categories. Consequently, estimated response of purchased quantities is also small, and not entirely consistent with the size of the price change. Results also suggest that the tax has reduced purchases of regular soft drinks even in absence of a price effect, while purchases of diet drinks (which are taxed) have increased despite some evidence of a price increase following the tax. These and other results are consistent with our estimates of the taste effect of the tax, and may suggest that the labeling effect of soda taxes might have a broader reach than the taxes themselves.