Estimating Price And Income Elasticity Of The Demand For Sugar Sweetened Beverages In Pakistan
Author: Ghufran Khan

A huge and expanding body of scientific knowledge prove that sugar- contain drinks are harmful to health. Consumption of sugar-sweetened beverages (SSB) is linked to obesity and type 2 diabetes. Pakistan has one of the highest per capita soft drinks consumption rates in the world, as well as high obesity and diabetes rates. Fiscal measures, such as taxation, have been proposed as a public health policy to reduce Sugar-sweetened beverages consumption. Taxation policies are effective tools for reducing the consumption if these items on which taxes are levied are price elastic. We have estimated a double log model for beverages consumption and calculated the own and cross price elasticities for soft drinks (carbonated drinks) and for all sugar-sweetened beverages (Squash, fresh juice and Packed Juice) in Pakistan. Models were formed by income quintile and over region level in Pakistan. Price elasticity for soft drinks turned out to be -.562 and -.88 in the case of SSB, i.e., a ten percent rise in price from Rs 65 (average price in our sample) to Rs 71 is estimated to result in a 126-liter demand which is reduction in the amount of soft drinks consumed from 134 liters per household annually. Soft drinks price increases are also linked to switching to other beverages, squash, fresh juice and packed juice. For soft drinks, Households in metropolitan regions, those living in more marginalized areas, and those with higher incomes all had higher elasticities. A tax on soft drinks or on all SSB could limit consumption, especially among the poor, and hence lower the incidence of NCDs and the costs associated with them. However, to estimate the potential impact on total calories ingested, substitutes and complementarities with other foods and beverages should be assessed as well. Supervisor:- Dr. Mahmood Khalid

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Supervisor: Mahmood Khalid
Cosupervisor: Sheh Mureed

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