  In October 2011, Denmark introduced the world's first and, to date, only tax
targeting saturated fat. However, this tax was subsequently abolished in
January 2013. Leveraging exogenous variation from untaxed Northern-German
consumers, we employ a difference-in-differences approach to estimate the
causal effects of both the implementation and repeal of the tax on consumption
and expenditure behavior across eight product categories targeted by the tax.
Our findings reveal significant heterogeneity in the tax's impact across these
products. During the taxed period, there was a notable decline in consumption
of bacon, liver sausage, salami, and cheese, particularly among low-income
households. In contrast, expenditure on butter, cream, margarine, and sour
cream increased as prices rose. Interestingly, we do not observe any difference
in expenditure increases between high and low-income households, suggesting
that the latter were disproportionately affected by the tax. After the repeal
of the tax, we do not observe any significant decline in consumption. On the
contrary, there was an overall increase in consumption for certain products,
prompting concerns about unintended consequences resulting from the brief
implementation of the tax.
