United Mexican States Reducing Fuel Subsidies

This paper analyzes the economic,
distributional, and environmental impact that energy subsidy
reductions and alternative compensating mechanisms might
have in Mexico. To achieve that goal, author use a
computable general equilibrium model of the Mexican economy.
They make several important changes to the original model to
build the energy subsidies (to gasoline, diesel, electricity
and liquefied petroleum gas) into the benchmark and then do
an array of simulations to see the effects of removing such
subsidies. The report results for 2012, which is the initial
year; 2018, which will be the end of the next
administration; and 2024 and 2030, which represent the
medium and long term, respectively. When doing the
simulations, author look at possible compensation mechanisms
and analyze the impact on the income groups that may be
affected by the reduction of energy subsidies.