Heterogeneous welfare effects of corrective taxes: Evidence from South Africa’s soda tax

Working paper 26 Feb 2026 State Effectiveness, Sustainable Growth and Tax for Growth

This project provides the first systematic evidence from a developing economy with a high obesity burden on how a sugar tax affects sugary drink consumption, production, substitution to untaxed products, and distributional outcomes across income groups. Working with government partners in South Africa, the study evaluates welfare and economic effects on consumers, firms, and the state, with lessons for other developing countries considering similar policies.