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

  • Antón-Sarabia, Arturo
  • Hernández-Trillo, Fausto

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.

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Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 67 (2014)
Issue (Month): C ()
Pages: 564-571

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Handle: RePEc:eee:enepol:v:67:y:2014:i:c:p:564-571
Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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  1. 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.
  2. Bovenberg, A.L. & de Mooij, R.A., 1994. "Environmental levies and distortionary taxation," Other publications TiSEM 4b32deaa-ec2f-4de7-b59b-9, Tilburg University, School of Economics and Management.
  3. Gakenheimer, Ralph, 1999. "Urban mobility in the developing world," Transportation Research Part A: Policy and Practice, Elsevier, vol. 33(7-8), pages 671-689.
  4. Eva O. Arceo Gómez & Raymundo M. Campos-Vázquez, 2010. "Labor supply of married women in Mexico: 1990-2000," Serie documentos de trabajo del Centro de Estudios Económicos 2010-16, El Colegio de México, Centro de Estudios Económicos.
  5. A. Lans Bovenberg & Lawrence H. Goulder, 1994. "Optimal Environmental Taxation in the Presence of Other Taxes: General Equilibrium Analyses," NBER Working Papers 4897, National Bureau of Economic Research, Inc.
  6. Gong, Xiaodong & van Soest, Arthur, 2000. "Family Structure and Female Labour Supply in Mexico City," IZA Discussion Papers 214, Institute for the Study of Labor (IZA).
  7. 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.
  8. Cinthya Caamal Olvera., 2007. "Oferta Laboral en México: un enfoque de variables instrumentales," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 115-154, May.
  9. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  10. Bovenberg, A. L. & van der Ploeg, F., 1994. "Environmental policy, public finance and the labour market in a second-best world," Journal of Public Economics, Elsevier, vol. 55(3), pages 349-390, November.
  11. repec:ner:tilbur:urn:nbn:nl:ui:12-152985 is not listed on IDEAS
  12. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
  13. Aaron S. Edlin & Pinar Karaca-Mandic, 2004. "The Accident Externality from Driving," Public Economics 0401003, EconWPA.
  14. Raymundo M. Campos-Vázquez, 2010. "The Effects of Macroeconomic Shocks on Employment: The Case of Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 25(1), pages 177-246.
  15. West, Sarah E., 2004. "Distributional effects of alternative vehicle pollution control policies," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 735-757, March.
  16. 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.
  17. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
  18. Richard S.J. Tol & Samuel Fankhauser & Richard G. Richels & Joel B. Smith, 2000. "How Much Damage Will Climate Change Do? Recent Estimates," Working Papers FNU-2, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2000.
  19. Parry, Ian & Strand, Jon, 2012. "International fuel tax assessment: an application to Chile," Environment and Development Economics, Cambridge University Press, vol. 17(02), pages 127-144, April.
  20. Small, Kenneth A. & Kazimi, Camilla, 1995. "On the Costs of Air Pollution from Motor Vehicles," University of California Transportation Center, Working Papers qt0sx81025, University of California Transportation Center.
  21. Lin, C.-Y. Cynthia & Prince, Lea, 2010. "The Optimal Gas Tax for California," Institute of Transportation Studies, Working Paper Series qt43k7p395, Institute of Transportation Studies, UC Davis.
  22. Sterner, Thomas, 2007. "Fuel taxes: An important instrument for climate policy," Energy Policy, Elsevier, vol. 35(6), pages 3194-3202, June.
  23. Poterba, J.M., 1990. "Is The Gasoline Tax Regressive?," Working papers 568, Massachusetts Institute of Technology (MIT), Department of Economics.
  24. repec:ner:tilbur:urn:nbn:nl:ui:12-73560 is not listed on IDEAS
  25. Cragg, Michael Ian & Epelbaum, Mario, 1996. "Why has wage dispersion grown in Mexico? Is it the incidence of reforms or the growing demand for skills?," Journal of Development Economics, Elsevier, vol. 51(1), pages 99-116, October.
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