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Compensation against Fuel Inflation: Temporary Tax Rebates or Transfers?

Author

Listed:
  • Odran Bonnet
  • Étienne Fize
  • Tristan Loisel
  • Lionel Wilner
Abstract
This article exploits both the crude oil price surge consecutive to the invasion of Ukraine and 2022 fuel excise tax rebates in France as quasi-natural experiments to infer the price sensitivity of fuel demand. Based on granular individual bank account data at the transaction level, we properly disentangle anticipation effects from price effects, and estimate an average price elasticity of -0.31. It varies little with respect to income and location but substantially decreases, in absolute, with respect to fuel spending and is higher for retirees. We evaluate financial and distributional effects of the actual tax policy as well as its impact on CO2 emissions based on counterfactual simulations. We empirically demonstrate that resorting to transfers, be they targeted or not, achieves only imperfect compensation against fuel inflation. However, we show that a policy maker subject to a tight budget constraint and seeking to alleviate excessive losses, relative to income, prefers means-tested transfers to rebates.

Suggested Citation

  • Odran Bonnet & Étienne Fize & Tristan Loisel & Lionel Wilner, 2024. "Compensation against Fuel Inflation: Temporary Tax Rebates or Transfers?," CESifo Working Paper Series 10917, CESifo.
    • Handle: RePEc:ces:ceswps:_10917
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    commodity taxation; excise tax; tax-and-transfer schemes; fuel price elasticity; anticipatory behaviour; transaction-level data;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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