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Understanding the distributional impacts of increases in fuel prices on poverty and inequality in Paraguay

Author

Listed:
  • Gustavo Canavire-Bacarreza

    (The World Bank)

  • Lyliana Gayoso de Ervin

    (Meredith College)

  • Juan José Galeano

    (Ministerio de Hacienda, Gobierno de Paraguay)

  • Juan Pablo Baquero

    (Boston College)

Abstract

The recent global increases in fuel prices threaten the gains in poverty reduction that countries like Paraguay have achieved in the last few decades. Because of this, policy makers must understand the potential distributional impacts of increases in fuel prices to evaluate the implementation of alternative measures that could mitigate these impacts. In this paper, we analyze the potential effects of increases in fuel prices on poverty and inequality in Paraguay. Using microsimulation methods and based on the Commitment to Equity (CEQ) framework, we estimate the impact of higher fuel prices on welfare, poverty, and inequality based on three scenarios: (a) increases in gasoline prices, (b) increases in diesel prices, and (c) simultaneous increases in gasoline and diesel prices. The results obtained suggest that the total impact of increasing fuel prices tends to be more regressive in Paraguay. At the same time, the results of our simulations indicate small positive effects on income inequality.

Suggested Citation

  • Gustavo Canavire-Bacarreza & Lyliana Gayoso de Ervin & Juan José Galeano & Juan Pablo Baquero, 2023. "Understanding the distributional impacts of increases in fuel prices on poverty and inequality in Paraguay," Revista Latinoamericana de Desarrollo Economico, Carrera de Economía de la Universidad Católica Boliviana (UCB), issue 39, pages 77-108.
    • Handle: RePEc:ris:revlde:2008
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    Cited by:

    1. Can, Zeynep Gizem & O'Donoghue, Cathal & Sologon, Denisa M. & Smith, Darius & Griffin, Rosaleen & Murray, Una, 2023. "Modelling the Distributional Effects of the Cost-of-Living Crisis in Turkey and the South Caucasus: A Microsimulation Analysis," IZA Discussion Papers 16619, Institute of Labor Economics (IZA).
    2. Gutierrez-Lythgoe, Antonio, 2023. "Demanda energética residencial en España: Una aplicación del modelo QUAIDS [Residential energy demand in Spain: An application of the QUAIDS model]," MPRA Paper 120229, University Library of Munich, Germany.

    More about this item

    Keywords

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    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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