How price inelastic is demand for gasoline in fuel-subsidizing economies?

摘要: Abstract In recent years, governments that have historically subsidized domestic fuel consumption face an ever-growing challenge in maintaining subsidies and embarked on subsidy reform. This paper estimates the price income elasticity of demand for gasoline countries where prices are government-subsidized. We make use biennial panel road-sector data 32 over 1998–2010 period find to be inelastic both short run long run. estimate short-run elasticities at − 0.05 0.16 long-run − 0.25 0.81, respectively. It is our contention concerned should play active role identifying committing a road map progressively abandoning subsidies. They also not discouraged by relatively small corrections A reduction can eventually release considerable amount resources more crucial potentially growth-enhancing public services such as education health.