Fuel tax incidence in developing countries: The case of Costa Rica
AbstractAlthough fuel taxes are a practical means of curbing vehicular air pollution, congestion, and accidents in developing countries--all of which are typically major problems--they are often opposed on distributional grounds. Yet few studies have investigated fuel tax incidence in a developing country context. We use household survey data and income-outcome coefficients to analyze fuel tax incidence in Costa Rica. We find that the effect of a 10% fuel price hike through direct spending on gasoline would be progressive, its effect through spending on diesel--both directly and via bus transportation--would be regressive (mainly because poorer households rely heavily on buses), and its effect through spending on goods other than fuel and bus transportation would be relatively small, albeit regressive. Finally, we find that the overall effect of a 10% fuel price hike through all types of direct and indirect spending would be neutral and the magnitude of this combined effect would be modest. We conclude that distributional concerns need not rule out using fuel taxes to address pressing public health and safety problems, particularly if gasoline and diesel taxes can be differentiated.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Policy.
Volume (Year): 38 (2010)
Issue (Month): 5 (May)
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Web page: http://www.elsevier.com/locate/enpol
Fuel tax incidence Transportation Costa Rica;
Other versions of this item:
- Blackman, Allen & Osakwe, Rebecca & Alpizar, Francisco, 2009. "Fuel Tax Incidence in Developing Countries: The Case of Costa Rica," Discussion Papers dp-09-24-efd, Resources For the Future.
- Blackman, Allen & Osakwe, Rebecca & Alpizar, Francisco, 2009. "Fuel Tax Incidence in Developing Countries: The Case of Costa Rica," Discussion Papers dp-09-37, Resources For the Future.
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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