Obesity rates and soda consumption are increasing at a worrisome pace in developing countries. In particular, soda companies seem to be targeting areas with poor access to clean water. This paper exploits a natural experiment in Peru and finds evidence that changes in the price of soda generate important effects in terms of obesity among individuals without piped water at home. These significant effects are driven by a combination of a large effect in the consumption of soda and an effect close to zero in the consumption of potential substitutes high in calories. This paper also provides some evidence that a reduction in price of soda reduces diarrhea prevalence, suggesting that some individuals substitute away contaminated water. This evidence suggests that soda taxes might be particularly beneficial among this population in terms of the prevention of obesity and possibly related diseases such as diabetes and cardiovascular diseases. The potential trade-off between obesity and diarrhea needs to be investigated in greater depth.
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