Compensating against fuel price inflation: Price subsidies or transfers? - PSE - Paris School of Economics
Journal Articles Journal of Environmental Economics and Management Year : 2024

Compensating against fuel price inflation: Price subsidies or transfers?

Abstract

Compensating agents against substantial and sudden shocks requires both targeting tax policies and taking behavioral responses into account. Based on transaction-level data from France, this article exploits quasi-experimental variation provided by 2022 fuel price inflation and excise tax cuts. After disentangling anticipation from price effects, we estimate a price elasticity of fuel demand of -0.31, on average, which varies little with respect to income and location but substantially decreases with fuel spending, in absolute value. Using targeted transfers only achieves imperfect compensation, yet a budget-constrained policy-maker seeking to alleviate excessive losses relative to income prefers income-based transfers to price subsidies.
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Dates and versions

hal-04799412 , version 1 (22-11-2024)

Identifiers

  • HAL Id : hal-04799412 , version 1

Cite

Odran Bonnet, Étienne Fize, Tristan Loisel, Lionel Wilner. Compensating against fuel price inflation: Price subsidies or transfers?. Journal of Environmental Economics and Management, In press. ⟨hal-04799412⟩
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