Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas

Abstract

In 2014 an excise tax to non-alcoholic sweetened beverages (SSB) was implemented in Mexico. The objective of this paper is to study whether and to what degree these taxes passed-through onto SSB prices in urban areas overall and by region, type of beverage and package size. Prices were obtained from the National Institute of Statistics and Geography from 2011 to 2014. We applied a pre-post quasi-experimental approach using fixed effects models. In sensitivity analysis we applied other model specifications to test the robustness of the findings and we also present weighted estimations based on household purchases. The dependent variables are real prices of a specific beverage category; the main independent variables are dummies for each month of 2014, and the models adjust for time trends and seasonality. Results suggest that the SSB tax passed along to consumers for all SSBs and we found overshifting for the carbonated SSBs. A greater effect is seen among the small package sizes, and we see heterogeneous effects by region. Estimating the effect of the tax on prices is important to understand the potential effect on consumption.

Fig 1. Average price per liter by type of beverage (unadjusted).