Optimal gasoline tax in developing, oil-producing countries: The case of Mexico

Arturo Antón-Sarabia and Fausto Hernandez-Trillo

Energy Policy, 2014, vol. 67, issue C, 564-571

Abstract: This paper uses the methodology of Parry and Small (2005) to estimate the optimal gasoline tax for a less-developed oil-producing country. The relevance of the estimation relies on the differences between less-developed countries (LDCs) and industrial countries. We argue that lawless roads, general subsidies on gasoline, poor mass transportation systems, older vehicle fleets and unregulated city growth make the tax rates in LDCs differ substantially from the rates in the developed world. We find that the optimal gasoline tax is $1.90 per gallon at 2011 prices and show that the estimate differences are in line with the factors hypothesized. In contrast to the existing literature on industrial countries, we show that the relative gasoline tax incidence may be progressive in Mexico and, more generally, in LDCs.

Keywords: Gasoline tax; Gasoline subsidy; Tax incidence (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Optimal Gasoline Tax in Developing, Oil-Producing Countries: The Case of Mexico (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:67:y:2014:i:c:p:564-571

DOI: 10.1016/j.enpol.2013.11.058

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