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Fuel tax, cross subsidy and transport: Assessing the effects on income and consumption distribution in Brazil

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  • Proque, Andressa Lemes
  • Betarelli Junior, Admir Antonio
  • Perobelli, Fernando Salgueiro

Abstract

Passenger transport has become a typical item in the household budget in Brazil, and structural changes in this type of service affect households differently. Our paper explores the links between consumption, income and transport in assessing the redistributive and economic effects of the fuel tax in the Brazilian economy, called contribution of intervention in the economic domain (CIDE). To accomplish this task, we developed a dynamic computable general equilibrium model that recognizes a Social Accounting Matrix (SAM). Two scenarios are evaluated: (1) an overall cut of CIDE-fuels to assess its role in economy; (2) the burden of the gasoline tax and reduction of the diesel tax to subsidize public transport services. The main findings indicate a deviation from real GDP above the baseline forecast path, positively affected by internal market and the reduction in income inequality. Typical households in the middle- and lower-income bracket would benefit most from these policy instruments.

Suggested Citation

  • Proque, Andressa Lemes & Betarelli Junior, Admir Antonio & Perobelli, Fernando Salgueiro, 2022. "Fuel tax, cross subsidy and transport: Assessing the effects on income and consumption distribution in Brazil," Research in Transportation Economics, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:retrec:v:95:y:2022:i:c:s0739885922000270
    DOI: 10.1016/j.retrec.2022.101204
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    More about this item

    Keywords

    Fuel tax; Cross subsidy; Dynamic CGE model; Household income distribution; Economic growth;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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