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Are "Flexible" Taxation Mechanisms Effective in Stabilizing Fuel Prices? An Evaluation Considering the Italian Fuel Markets

  • Marina Di Giacomo

    ()

    (Department of Economics and Public Finance "G. Prato", University of Torino)

  • Massimiliano Piacenza

    ()

    (Department of Economics and Public Finance "G. Prato", University of Torino)

  • Gilberto Turati

    ()

    (Department of Economics and Public Finance "G. Prato", University of Torino)

In this paper we study the incidence of specific taxes in the Italian fuel markets, and exploit these findings to simulate the effects of fiscal policies aimed at mitigating oil price fluctuations. We estimate several reduced-form specifications, using as dependent variables the equilibrium wholesale prices for gasoline and motor diesel over the period 1996-2007. In particular, we assess the impact on wholesale gasoline and motor diesel prices stemming from the creation of an automatic fiscal mechanism consisting of reductions in specific taxes matching the rise in oil prices. Our simulations suggest that “flexible” taxation mechanisms could not be a proper policy for stabilizing price levels in fuel markets. A more effective control on prices can be obtained by focusing on the market structure of these industries, where Antitrust Authority could play a significant role.

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File URL: http://web.econ.unito.it/prato/papers/n7.pdf
File Function: First version, 2009
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Paper provided by Former Department of Economics and Public Finance "G. Prato", University of Torino in its series Working papers with number 7.

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Length: 28 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:tur:wpaper:7
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Web page: http://eco83.econ.unito.it/prato/

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  1. Chouinard, Hayley & Perloff, Jeffrey M, 2003. "Incidence of federal and state gasoline taxes," CUDARE Working Paper Series 952, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  2. Chouinard, Hayley & Perloff, Jeffrey M, 2002. "Gasoline price differences: taxes, pollution regulations, mergers, market power, and market conditions," CUDARE Working Paper Series 951, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  3. Doyle Jr., Joseph J. & Samphantharak, Krislert, 2008. "$2.00 Gas! Studying the effects of a gas tax moratorium," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 869-884, April.
  4. Hamilton, Stephen F., 1999. "Tax incidence under oligopoly: a comparison of policy approaches," Journal of Public Economics, Elsevier, vol. 71(2), pages 233-245, February.
  5. Baltagi, Badi H. & Griffin, James M., 1997. "Pooled estimators vs. their heterogeneous counterparts in the context of dynamic demand for gasoline," Journal of Econometrics, Elsevier, vol. 77(2), pages 303-327, April.
  6. Wlazlowski, Szymon & Giulietti, Monica & Binner, Jane & Milas, Costas, 2009. "Price dynamics in European petroleum markets," Energy Economics, Elsevier, vol. 31(1), pages 99-108, January.
  7. James Alm & Edward Sennoga & Mark Skidmore, 2009. "Perfect Competition, Urbanization, And Tax Incidence In The Retail Gasoline Market," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 118-134, 01.
  8. Galeotti, Marzio & Lanza, Alessandro & Manera, Matteo, 2003. "Rockets and feathers revisited: an international comparison on European gasoline markets," Energy Economics, Elsevier, vol. 25(2), pages 175-190, March.
  9. Kayser, Hilke A., 2000. "Gasoline demand and car choice: estimating gasoline demand using household information," Energy Economics, Elsevier, vol. 22(3), pages 331-348, June.
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