The Incidence of Soft-drink Taxes on Consumer Prices: Evidence from the French Soda Tax.

Summary We use Kantar WorldPanel Homescan data to examine the incidence of the French soft-drink tax on consumer prices and welfare. The French soda tax is a unit excise tax of 0.076 Euro/Liter on sugar-sweetened beverages, which was implemented in January 2012. We first construct theoretically founded local Exact Price Indices, which account for product heterogeneity and availability in local markets. Our preliminary results suggest that the soda tax has had a very modest on the price of soft-drinks (around +0.6%), once shocks on input costs are accounted for. We do not find evidence of heterogeneity in incidence between across income groups or consumption levels. Finally, estimates of simple demand system with Fisher vs. Exact Price Indices suggest that price measurement is likely to have an important impact on ex ante evaluations of the effectiveness of behavioral taxes.