Energy taxation, subsidy removal and poverty in Mexico

Jose Labeaga, Xavier Labandeira and Xiral López-Otero

Environment and Development Economics, 2021, vol. 26, issue 3, 239-260

Abstract: Equity and efficiency are crucial issues behind any tax reform, but they are particularly relevant in countries with high inequality and large shares of poverty. This paper provides a comprehensive socio-economic empirical assessment of Mexico's proposed (and partially implemented) tax reforms in the energy domain, and of a hypothetical partial removal of existing electricity subsidies. Using a rich household income and expenditure survey within the context of a demand system adjustment of non-durable goods, the article provides the public-revenue, environmental and distributional impacts from the simulation of different combinations of energy taxation, subsidy-removal and distributive offsets. The paper also provides detailed ex-ante evidence on the effects of compensatory devices that may contribute to the successful implementation of energy reform packages and significant poverty alleviation in Mexico.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:cup:endeec:v:26:y:2021:i:3:p:239-260_3

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