 Dynamics of fuel demand elasticity: Evidence from Iranian subsidy reformsHamed Ghoddusi, Mohammad Morovati and Nima Rafizadeh Energy Economics, 2022, vol. 110, issue C Abstract: We exploit three major transport fuel (gasoline and diesel) subsidy reforms in Iran, as quasi-experiments, to investigate the impact of permanent upward price changes on the responsiveness of fuel consumption. We employ monthly regional-level data of fuel consumption in Iran and also explicitly account for outbound cross-border smuggling from Iran to estimate the short, intermediate, and long-term price elasticity of demand. We find that price elasticity and price levels are inversely related to each other. All of our estimations also suggest a substantial impact of subsidy reforms on consumers’ behavior such that the magnitude of price elasticities consistently increases after each of the three major reforms. Finally, we find that fuel consumption is more responsive to a change in domestic price in the longer run. Our paper provides quantitative evidence of behavior change after a subsidy reform program, which can be used to better set fiscal and environmental targets. Keywords: Subsidized fuel; Subsidy reform; Price elasticity; Time-varying elasticity; Panel data estimation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:110:y:2022:i:c:s0140988322001815 DOI: 10.1016/j.eneco.2022.106009 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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