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The Hidden Costs of Tariff Misclassification: Structural Winners and Losers

Author

Listed:
  • Hector Sandoval

    (Bureau of Economic and Business Research (BEBR), University of Florida)

  • Pedro Hancevic

    (Division of Economics, CIDE)

  • Hernán Bejarano

    (Division of Economics, CIDE)

Abstract

We propose an empirical model to evaluate firms' choices in electric tariff contracting. By combining novel data from the Non-residential Electricity Consumption Survey (ENCENRE) with utility billing data from the national utility company, we analyze two pathological situations revealed by the electric bills of commercial and service SMEs in Aguascalientes, Mexico, during 2019 and 2020. First, despite being banned, many firms pay the residential tariff. Among these firms, some pay the regular subsidized rate, while others pay the high-demand rate, which is higher than the corresponding business rate. Additionally, for another group of companies, there are two competing business tariffs, many of which are misclassified and thus must be re-categorized to afford less expensive electric bills. A rich set of explanatory variables is used to quantify the two biases, explain the wrong decisions, estimate hidden costs and subsidies at the national level, and provide valuable policy implications.

Suggested Citation

  • Hector Sandoval & Pedro Hancevic & Hernán Bejarano, 2024. "The Hidden Costs of Tariff Misclassification: Structural Winners and Losers," Working Papers DTE 637, CIDE, División de Economía.
    • Handle: RePEc:emc:wpaper:dte637
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    More about this item

    Keywords

    tariff misclassification; firm behavior; electricity consumption; self- selection; suboptimal choice; illegal behavior.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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