A reconsideration of the sugar sweetened beverage tax in a household production model

Abstract

We study the impact of a hypothetical tax on sugar - sweetened beverages (SSBs) on the U.S. households’ nutrients purchase, welfare change, and health benefit. Differently from the traditional approach, Food at Home (FAH) is here defined as a “home” good instead of a market good and consumers’ demands derived under the assumption that households maximize utility subject to both a money and a time constraint. The model is estimated by using an incomplete approximate Exact Affine Stone Index (EASI) demand system on a data set built by merging the U.S. consumer expenditure and time use surveys. Results show that a SSB tax would be much more effective in decreasing household nutrients purchase than it would appear by estimating a model neglecting time costs in home food production, due to a lesser compensation of calories from increasing FAH consumption. A tax-induced 38% increase in SSB price is predicted to decrease the per capita energy purchase by 41 kcal/day.