Universal and targeted subsidies in urban bus transport: distributional effects and policy lessons from Argentina

This paper examines the distributional effects of bus transport subsidies in Argentina, a country with a longstanding system of fare support. A key feature of this subsidy scheme is the coexistence of a universal flat subsidy for all users and targeted mechanisms aimed at protecting lower-income groups, alongside integrated fare discounts for multistage trips. Using household survey data, mobility microdata, and administrative records, we estimate the distributional incidence of these subsidies. We find that while subsidies are progressive in relative terms, they exhibit weak targeting in absolute terms, with a substantial share of benefits accruing to middle- and high-income users. This pattern is largely driven by the dominance of the universal subsidy over more targeted instruments. The paper highlights the equity challenges inherent in mixed subsidy structures and offers policy lessons for countries seeking to redesign fare systems, improve targeting, or rationalize public transport subsidies under fiscal constraints.