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Compensating against fuel price inflation: Price subsidies or transfers?

Author

Listed:
  • Odran Bonnet

    (INSEE - Institut national de la statistique et des études économiques (INSEE))

  • Étienne Fize

    (IPP - Institut des politiques publiques, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Tristan Loisel

    (INSEE - Institut national de la statistique et des études économiques (INSEE))

  • Lionel Wilner

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

Abstract

Compensating agents against substantial and sudden shocks requires both targeting tax policies and taking behavioral responses into account. Based on transaction-level data from France, this article exploits quasi-experimental variation provided by 2022 fuel price inflation and excise tax cuts. After disentangling anticipation from price effects, we estimate a price elasticity of fuel demand of -0.31, on average, which varies little with respect to income and location but substantially decreases with fuel spending, in absolute value. Using targeted transfers only achieves imperfect compensation, yet a budget-constrained policy-maker seeking to alleviate excessive losses relative to income prefers income-based transfers to price subsidies.

Suggested Citation

  • Odran Bonnet & Étienne Fize & Tristan Loisel & Lionel Wilner, 2024. "Compensating against fuel price inflation: Price subsidies or transfers?," Post-Print hal-04799412, HAL.
    • Handle: RePEc:hal:journl:hal-04799412
    Note: View the original document on HAL open archive server: https://hal.science/hal-04799412v1
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    References listed on IDEAS

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