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Sin Taxes and Self-Control

  • Renke Schmacker
  • Sinne Smed
American Economic Journal: Economic Policy
vol. 15, no. 3, August 2023
(pp. 1-34)
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Abstract

According to theory, "sin taxes" are welfare improving if consumers with low self-control respond at least as much to the tax as consumers with high self-control. We investigate empirically if demand response to soft drink and fat tax variations in Denmark depends on consumers' self-control. We use a unique home-scan panel that includes a survey measure of self-control. When taxes increase, consumers with low self-control reduce purchases less strongly than consumers with high self-control. When taxes decrease, both groups increase their purchases similarly. The results show an asymmetry in price elasticities by self-control that is more pronounced when taxes increase.

Citation

Schmacker, Renke, and Sinne Smed. 2023. "Sin Taxes and Self-Control." American Economic Journal: Economic Policy, 15 (3): 1-34. DOI: 10.1257/pol.20200479

Additional Materials

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • H31 Fiscal Policies and Behavior of Economic Agents: Household
  • I12 Health Behavior
  • I18 Health: Government Policy; Regulation; Public Health
  • L66 Food; Beverages; Cosmetics; Tobacco; Wine and Spirits
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