How Well Targeted Are Soda Taxes?

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Abstract

Soda taxes aim to reduce excessive sugar consumption. We assess who is most impacted by soda taxes. We estimate demand using micro longitudinal data covering on-the-go purchases, and exploit the panel dimension to estimate individual-specific preferences. We relate these preferences and counterfactual predictions to individual characteristics and show that soda taxes are relatively effective at targeting the sugar intake of the young, are less successful at targeting the intake of those with high total dietary sugar, and are unlikely to be strongly regressive especially if consumers benefit from averted internalities. (JEL D12, H22, H25, H71)

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Poverty impedes cognitive function.

Anandi Mani, Sendhil Mullainathan, Eldar Shafir … (2013)

The poor often behave in less capable ways, which can further perpetuate poverty. We hypothesize that poverty directly impedes cognitive function and present two studies that test this hypothesis. First, we experimentally induced thoughts about finances and found that this reduces cognitive performance among poor but not in well-off participants. Second, we examined the cognitive function of farmers over the planting cycle. We found that the same farmer shows diminished cognitive performance before harvest, when poor, as compared with after harvest, when rich. This cannot be explained by differences in time available, nutrition, or work effort. Nor can it be explained with stress: Although farmers do show more stress before harvest, that does not account for diminished cognitive performance. Instead, it appears that poverty itself reduces cognitive capacity. We suggest that this is because poverty-related concerns consume mental resources, leaving less for other tasks. These data provide a previously unexamined perspective and help explain a spectrum of behaviors among the poor. We discuss some implications for poverty policy.

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On the psychology of poverty.

Johannes Haushofer, Ernst Fehr (2014)

Poverty remains one of the most pressing problems facing the world; the mechanisms through which poverty arises and perpetuates itself, however, are not well understood. Here, we examine the evidence for the hypothesis that poverty may have particular psychological consequences that can lead to economic behaviors that make it difficult to escape poverty. The evidence indicates that poverty causes stress and negative affective states which in turn may lead to short-sighted and risk-averse decision-making, possibly by limiting attention and favoring habitual behaviors at the expense of goal-directed ones. Together, these relationships may constitute a feedback loop that contributes to the perpetuation of poverty. We conclude by pointing toward specific gaps in our knowledge and outlining poverty alleviation programs that this mechanism suggests. Copyright © 2014, American Association for the Advancement of Science.