Revisiting Distributional Effects of Energy Subsidies in Argentina

We review the distributional incidence of residential energy subsidies using the attractive case of Argentina, a developing country that has massively subsidized electricity in recent decades. Using multiple data sources, we explore two central dimensions, usually omitted in previous research. On the one hand, we focus on geography given that previous studies mostly focus on the Buenos Aires Metropolitan Area (i.e., AMBA), the most populated region in the country. However, Argentina’s territorial heterogeneity demands further analysis, given that the stage of electricity distribution introduces heterogeneities between jurisdictions. On the other hand, we focus on the subsidies’ financing given that previous studies do not focus on the net incidence. Our results indicate that: regional disparities in the costs of electricity distribution and the prices set by the distribution companies are key drivers of the distributional incidence. Also omitting subsidies’ financing may lead to overestimating the belief about their redistributive effect.