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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Marina Di Giacomo & Massimiliano Piacenza & Gilberto Turati, 2009. "Are "Flexible" Taxation Mechanisms Effective in Stabilizing Fuel Prices? An Evaluation Considering the Italian Fuel Markets," Working papers 07, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    • Handle: RePEc:tur:wpaper:07
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    File URL: http://www.bemservizi.unito.it/repec/tur/wpaper/n7.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    fuel markets; specific taxes; tax incidence; sterilization policy; antitrust policy;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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