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Pass-through of Temporary Fuel Tax Reductions: Evidence from Europe

Author

Listed:
  • Chiara Drolsbach

    (Justus Liebig University Giessen)

  • Maximilian Maurice Gail

    (Justus Liebig University Giessen)

  • Phil-Adrian Klotz

    (Justus Liebig University Giessen)

Abstract

Several European countries have implemented temporarily fuel tax reductions in 2022 to relieve the financial burden on their citizens. This paper provides estimates of the pass-through rates as well as the effect on retail margins for France, Germany and Italy. Using a unique data set containing daily consumer prices for gasoline and diesel, we employ a staggered Difference-in-Differences (DiD) design. Our results show a heterogeneous pass-through of the fuel tax reductions depending on the country and on the type of fuel. Nevertheless, we find a full- or even over-shifting of the tax cuts in all three countries. These findings also have important implications for the effective design of unconventional fiscal policy as well as for competition policy in the fuel market.

Suggested Citation

  • Chiara Drolsbach & Maximilian Maurice Gail & Phil-Adrian Klotz, 2022. "Pass-through of Temporary Fuel Tax Reductions: Evidence from Europe," MAGKS Papers on Economics 202239, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:202239
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    File URL: https://www.uni-marburg.de/en/fb02/research-groups/economics/macroeconomics/research/magks-joint-discussion-papers-in-economics/papers/2022-papers/39-2022_drolsbach.pdf
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    References listed on IDEAS

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    2. Mats Petter Kahl, 2023. "Was the German fuel discount passed on to consumers?," Working Paper Series in Economics 419, University of Lüneburg, Institute of Economics.

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    More about this item

    Keywords

    Fuel Prices; Pass-through; Environmental taxes; Staggered DiD;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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