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Understanding the Distributional Impacts of Increases in Fuel Prices on Poverty and Inequality in Paraguay

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  • Canavire Bacarreza, Gustavo J.

    (World Bank)

  • de Ervin, Lyliana Gayoso

    (World Bank)

  • Galeano, Juan José

    (Ministry of Finance, Government of Paraguay)

  • Baquero, Juan Pablo

    (Boston College)

Abstract

The recent global increases in fuel prices threaten the gains in poverty reduction that countries like Paraguay have achieved over the past few decades. Therefore, 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. This paper analyzes the potential effects of fuel prices on poverty and inequality in Paraguay. Using microsimulation methods and based on the Commitment to Equity framework, it estimates 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 the simulations indicate small effects on income inequality.

Suggested Citation

  • Canavire Bacarreza, Gustavo J. & de Ervin, Lyliana Gayoso & Galeano, Juan José & Baquero, Juan Pablo, 2023. "Understanding the Distributional Impacts of Increases in Fuel Prices on Poverty and Inequality in Paraguay," IZA Discussion Papers 15922, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15922
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    References listed on IDEAS

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    1. Arndt, Channing & Benfica, Rui & Maximiano, Nelson & Nucifora, Antonio M.D. & Thurlow, James, 2008. "Higher fuel and food prices: Economic impacts and responses for Mozambique," IFPRI discussion papers 836, International Food Policy Research Institute (IFPRI).
    2. Channing Arndt & Rui Benfica & Nelson Maximiano & Antonio M. D. Nucifora & James T. Thurlow, 2008. "Higher fuel and food prices: impacts and responses for Mozambique," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 497-511, November.
    3. Ersado, Lire, 2012. "Poverty and distributional impact of gas price hike in Armenia," Policy Research Working Paper Series 6150, The World Bank.
    4. Abd Azis Muthalib & Pasrun Adam & Rostin Rostin & Zainuddin Saenong & La Ode Suriadi, 2018. "The Influence of Fuel Prices and Unemployment Rate towards the Poverty Level in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 8(3), pages 37-42.
    5. Mr. David Coady & Valentina Flamini & Louis Sears, 2015. "The Unequal Benefits of Fuel Subsidies Revisited: Evidence for Developing Countries," IMF Working Papers 2015/250, International Monetary Fund.
    6. Shamaila Aziz & Muhammad Rizwan Yaseen & Sofia Anwar, 2016. "Impact of Rising Energy Prices on Consumer’s Welfare: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 605-618.
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    Cited by:

    1. Can, Zeynep Gizem & O'Donoghue, Cathal & Sologon, Denisa Maria & 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.

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    More about this item

    Keywords

    fuel prices; poverty; inequality; Paraguay;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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