Preschool Children’s Demand for Sugar Sweetened Beverages: Evidence from Stated-Preference Panel Data

Melbourne Institute Working Paper No. 25/16

Date: 2016

Author(s):

Ou Yang
Peter Sivey
Andrea M. de Silva
Anthony Scott

Abstract

Consumption of sugar sweetened beverages exhibits strong associations with weight gain, obesity, and dental caries, especially in young children. The aim of this paper is to examine the impact of price changes on children’s consumption of sugar-sweetened beverages. Using micro-level panel data obtained from a stated preference experiment, we specify a two-sided censoring semi-parametric demand system model with fixed effects. To overcome an estimation difficulty that is potentially a common issue to all applications studying micro-level consumption data, we propose a new consistent two-step estimation framework. The economic restrictions implied by consumption theory are imposed through a consistent and asymptotically efficient GMM estimator. Our results show that the uncompensated own-price elasticities for sugar-sweetened beverages range from -0.83 to -0.94, demonstrating inelastic but substantial price effects. The marginal effects of demand with respect to nutritional attributes of sugar-sweetened beverages are negligible overall, but are strongest for those in low-income households. High-income households are less responsive to price and not responsive at all to non-price attributes.