Compensating against fuel price inflation: Price subsidies or transfers?

Odran Bonnet, Étienne Fize, Tristan Loisel and Lionel Wilner
Additional contact information
Odran Bonnet: INSEE - Institut national de la statistique et des études économiques (INSEE)
Étienne Fize: IPP - Institut des politiques publiques, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Tristan Loisel: INSEE - Institut national de la statistique et des études économiques (INSEE)

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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.

Keywords: Commodity taxation; Excise fuel tax; Tax-and-transfer schemes; Gasoline price elasticity; Anticipatory behavior; Transaction-level data (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-ene
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Published in Journal of Environmental Economics and Management, inPress

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Related works:
Journal Article: Compensating against fuel price inflation: Price subsidies or transfers? (2025)
Working Paper: Compensating against fuel price inflation: Price subsidies or transfers? (2024)
Working Paper: Compensating against fuel price inflation: Price subsidies or transfers? (2024)
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