Compensation against fuel inflation: Temporary tax rebates or transfers?

Odran Bonnet, Etienne Fize, Tristan Loisel and Lionel Wilner
Additional contact information
Odran Bonnet: Insee
Etienne Fize: Institut des Politiques Publiques, Paris School of Economics
Tristan Loisel: Insee, Crest

No 2024-05, Working Papers from Center for Research in Economics and Statistics

Abstract: This article exploits both the crude oil price surge consecutive to the invasion of Ukraine and 2022 fuel excise tax rebates in France as quasi-natural experiments to infer the price sensitivity of fuel demand. Based on granular individual bank account data at the transaction level, we properly disentangle anticipation effects from price effects, and estimate an average price elasticity of -0.31. It varies little with respect to income and location but substantially decreases, in absolute, with respect to fuel spending and is higher for retirees. We evaluate financial and distributional effects of the actual tax policy as well as its impact on CO2 emissions based on counterfactual simulations. We empirically demonstrate that resorting to transfers, be they targeted or not, achieves only imperfect compensation against fuel inflation. However, we show that a policy maker subject to a tight budget constraint and seeking to alleviate excessive losses, relative to income, prefers means-tested transfers to rebates.

Keywords: Commodity taxation; Excise tax; Tax-and-transfer schemes; Fuel price elasticity; Anticipatory behavior; Transaction-level data. (search for similar items in EconPapers)
JEL-codes: C18 C51 D12 H23 H31 L71 Q31 Q35 Q41 (search for similar items in EconPapers)
Pages: 95 pages
Date: 2024-03-08
New Economics Papers: this item is included in nep-cis, nep-ene, nep-pbe, nep-pub, nep-tra and nep-tre
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http://crest.science/RePEc/wpstorage/2024-05.pdf CREST working paper version (application/pdf)

Related works:
Working Paper: Compensation against Fuel Inflation: Temporary Tax Rebates or Transfers? (2024)
Working Paper: How does fuel demand respond to price changes? Quasi-experimental evidence based on high-frequency data (2023)
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