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Energy taxation, subsidy removal and poverty in Mexico

Published online by Cambridge University Press:  23 September 2020

José M. Labeaga*
Affiliation:
Departamento de Teoría Económica y Economía Matemática, UNED, Madrid, Spain Economics for Energy, Vigo, Spain
Xavier Labandeira
Affiliation:
Economics for Energy, Vigo, Spain Rede, Universidade de Vigo, Facultade de CC.EE., Campus As Lagoas s/n, Vigo, Spain
Xiral López-Otero
Affiliation:
Departamento de Teoría Económica y Economía Matemática, UNED, Madrid, Spain
*
*Corresponding author. E-mail: jlabeaga@cee.uned.es

Abstract

Equity and efficiency are crucial issues behind any tax reform, but they are particularly relevant in countries with high inequality and large shares of poverty. This paper provides a comprehensive socio-economic empirical assessment of Mexico's proposed (and partially implemented) tax reforms in the energy domain, and of a hypothetical partial removal of existing electricity subsidies. Using a rich household income and expenditure survey within the context of a demand system adjustment of non-durable goods, the article provides the public-revenue, environmental and distributional impacts from the simulation of different combinations of energy taxation, subsidy-removal and distributive offsets. The paper also provides detailed ex-ante evidence on the effects of compensatory devices that may contribute to the successful implementation of energy reform packages and significant poverty alleviation in Mexico.

Type
Research Article
Copyright
Copyright © The Author(s), 2020. Published by Cambridge University Press

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