Fuel tax incidence in developing countries: The case of Costa Rica
Although 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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Parry, Ian & Small, Kenneth, 2002.
"Does Britain or the United States Have the Right Gasoline Tax?,"
dp-02-12-, Resources For the Future.
- Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
- Benjamin Bureau, 2011.
"Distributional effects of a carbon tax on car fuels in France,"
- Bureau, Benjamin, 2011. "Distributional effects of a carbon tax on car fuels in France," Energy Economics, Elsevier, vol. 33(1), pages 121-130, January.
- Walls, Margaret & Hanson, Jean, 1999. "Distributional Aspects of an Environmental Tax Shift: The Case of Motor Vehicle Emissions Taxes," National Tax Journal, National Tax Association, vol. 52(n. 1), pages 53-65, March.
- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, October.
- Arthur M. Wiese & Adam Rose & Gerald Schluter, 1995. "Motor-Fuel Taxes and Household Welfare: An Applied General Equilibrium Analysis," Land Economics, University of Wisconsin Press, vol. 71(2), pages 229-242.
- Kevin A. Hasset & Aparna Mathur & Gilbert Metcalf, 2007.
"The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis,"
Discussion Papers Series, Department of Economics, Tufts University
0714, Department of Economics, Tufts University.
- Kevin A. Hassett & Aparna Mathur & Gilbert E. Metcalf, 2009. "The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 155-178.
- Kevin A. Hassett & Aparna Mathur & Gilbert E. Metcalf, 2007. "The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis," NBER Working Papers 13554, National Bureau of Economic Research, Inc.
- Suits, Daniel B, 1977. "Measurement of Tax Progressivity," American Economic Review, American Economic Association, vol. 67(4), pages 747-52, September.
- Poterba, J.M., 1990.
"Is The Gasoline Tax Regressive?,"
568, Massachusetts Institute of Technology (MIT), Department of Economics.
- Sterner, Thomas, 2007. "Fuel taxes: An important instrument for climate policy," Energy Policy, Elsevier, vol. 35(6), pages 3194-3202, June.
- Datta, Ashokankur, 2010. "The incidence of fuel taxation in India," Energy Economics, Elsevier, vol. 32(Supplemen), pages S26-S33, September.
- Walls, Margaret & Hanson, Jean, 1996. "Distributional Impacts of an Environmental Tax Shift: The Case of Motor Vehicle Emissions Taxes," Discussion Papers dp-96-11, Resources For the Future.
- Metcalf, Gilbert E., 1999. "A Distributional Analysis of Green Tax Reforms," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 655-82, December.
- Alpizar, Francisco & Carlsson, Fredrik, 2003.
"Policy implications and analysis of the determinants of travel mode choice: an application of choice experiments to metropolitan Costa Rica,"
Environment and Development Economics,
Cambridge University Press, vol. 8(04), pages 603-619, October.
- Alpizar, Francisco & Carlsson, Fredrik, 2001. "Policy Implications and Analysis of the Determinants of Travel Mode Choice: An Application of Choice Experiments to Metropolitan Costa Rica," Working Papers in Economics 56, University of Gothenburg, Department of Economics.
- Ashokankur Datta, 2008. "The incidence of fuel taxation in India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-05, Indian Statistical Institute, New Delhi, India.
- Parry, Ian W.H. & Timilsina, Govinda R., 2010.
"How should passenger travel in Mexico City be priced?,"
Journal of Urban Economics,
Elsevier, vol. 68(2), pages 167-182, September.
- Parry, Ian W.H. & Timilsina, Govinda R., 2008. "How Should Passenger Travel in Mexico City Be Priced?," Discussion Papers dp-08-17, Resources For the Future.
- Parry, Ian W.H. & Walls, Margaret & Harrington, Winston, 2007.
"Automobile Externalities and Policies,"
dp-06-26, Resources For the Future.
- Joyce Dargay & Dermot Gately & Martin Sommer, 2007. "Vehicle Ownership and Income Growth, Worldwide: 1960-2030," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 143-170.
- West, Sarah E. & Williams III, Roberton C., 2007. "Optimal taxation and cross-price effects on labor supply: Estimates of the optimal gas tax," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 593-617, April.
- Timilsina, Govinda R. & Dulal, Hari B., 2009. "A review of regulatory instruments to control environmental externalities from the transport sector," Policy Research Working Paper Series 4867, The World Bank.
- Sarah E. West & Roberton C. Williams III, 2002.
"Estimates from a Consumer Demand System: Implications for the Incidence of Environmental Taxes,"
NBER Working Papers
9152, National Bureau of Economic Research, Inc.
- West, Sarah E. & Williams, R.C.Roberton III, 2004. "Estimates from a consumer demand system: implications for the incidence of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 535-558, May.
- Nick Johnstone & Jaime Echeverria & Ina Porras & Ronald Mejias, 2001. "The Environmental Consequences of Tax Differentiation by Vehicle Age in Costa Rica," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 44(6), pages 803-814.
- Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
- Timilsina, Govinda R. & Dulal, Hari B., 2008. "Fiscal policy instruments for reducing congestion and atmospheric emissions in the transport sector : a review," Policy Research Working Paper Series 4652, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:38:y:2010:i:5:p:2208-2215. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.