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Optimal Gasoline Tax in Developing, Oil-Producing Countries: The Case of Mexico

Author

Listed:
  • Fausto Hernández-Trillo

    () (Division of Economics, CIDE)

  • Arturo Antón-Sarabia

    () (Division of Economics, CIDE)

Abstract

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 cities’ unregulated growth make the LDC tax rate differ substantially from rates in the developed world. We find that the optimal gasoline tax is $1.91 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 illustrate that the relative gasoline tax incidence may be progressive in Mexico and, more generally, in LDCs.

Suggested Citation

  • Fausto Hernández-Trillo & Arturo Antón-Sarabia, 2013. "Optimal Gasoline Tax in Developing, Oil-Producing Countries: The Case of Mexico," Working papers DTE 555, CIDE, División de Economía.
  • Handle: RePEc:emc:wpaper:dte555
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    References listed on IDEAS

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    Cited by:

    1. Agostini, Claudio A. & Jiménez, Johanna, 2015. "The distributional incidence of the gasoline tax in Chile," Energy Policy, Elsevier, vol. 85(C), pages 243-252.
    2. Arturo Antón Sarabia & Fausto Hernández Trillo, 2019. "Internalizando externalidades: El impuesto a la gasolina en Guatemala," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 14(1), pages 1-20, Enero-Mar.
    3. Geir H. M. Bjertnæs, 2019. "Efficient taxation of fuel and road use," Discussion Papers 905, Statistics Norway, Research Department.
    4. Geir H. M. Bjertnaes, 2019. "Efficient Taxation of Fuel and Road Use," CESifo Working Paper Series 8019, CESifo.
    5. Geir H. M. Bjertnæs, 2017. "The efficient combination of taxes on fuel and vehicles," Discussion Papers 867, Statistics Norway, Research Department.
    6. Geir H. M. Bjertnæs, 2021. "Taxation of fuel and vehicles when emissions are constrained," Discussion Papers 949, Statistics Norway, Research Department.
    7. -, 2014. "The economics of climate change in Latin America and the Caribbean: Paradoxes and challenges. Overview for 2014," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 37056, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. Geir H. M. Bjertnaes, 2017. "The Efficient Combination of Taxes on Fuel and Vehicles," CESifo Working Paper Series 6789, CESifo.

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    More about this item

    Keywords

    gasoline tax; gasoline subsidy; tax incidence; Mexico;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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