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Abstract

Taxes on sugar-sweetened beverages have been widely proposed to combat the U.S. obesity crisis. Most previous work has found the effects of a SSB tax to be small to moderate. We address three limitations. First, we incorporate the supply side via a stochastic equilibrium displacement model. Second, we account for uncertainty elasticities using probability distributions associated with elasticities. Third, we address industry revenue effects. We find that assumptions about the supply side are more important than assumptions about substitution. ignoring supply side severely overestimates quantity and calorie effects and slightly underestimated revenue effects.

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