Price elasticity of gasoline smuggling

A semi-structural estimation approach

Hamed Ghoddusi, Nima Rafizadeh, Mohammad H. Rahmati

Research output: Contribution to journalArticle

Abstract

We estimate the price elasticity of the demand for gasoline smuggling in Iran. For this purpose, we employ a detailed panel of monthly gasoline consumption data from 160 distribution hubs during the period 2005–2014. We apply two different approaches which are diff-in-diff and panel data estimations. The results suggest that the foreign-to-home gasoline price ratios have a significant impact on the time-varying elasticity of demand. This finding supports the hypothesis that an increase in domestic gasoline prices will significantly reduce the demand for smuggling. In addition, as the distance of a region from its closest higher-price neighboring country diminishes, the price elasticity of demand for gasoline smuggling for that region declines as well. Finally, we find that when the ratio of foreign to domestic prices is higher, the gasoline demand sensitivities to price in neighboring countries go up. Our work offers new insights regarding the welfare impact of removing fuel subsidies and modifying fuel pricing policies.

Original languageEnglish (US)
Pages (from-to)171-185
Number of pages15
JournalEnergy Economics
Volume71
DOIs
StatePublished - Mar 1 2018

Fingerprint

Gasoline
Elasticity
Price elasticity
Structural estimation
Smuggling
Gasoline prices
Costs
Iran
Hub
Pricing policy
Time-varying
Panel data estimation
Elasticity of demand
Price elasticity of demand
Gasoline demand
Subsidies

All Science Journal Classification (ASJC) codes

  • Energy(all)
  • Economics and Econometrics

Cite this

Ghoddusi, Hamed ; Rafizadeh, Nima ; Rahmati, Mohammad H. / Price elasticity of gasoline smuggling : A semi-structural estimation approach. In: Energy Economics. 2018 ; Vol. 71. pp. 171-185.
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Price elasticity of gasoline smuggling : A semi-structural estimation approach. / Ghoddusi, Hamed; Rafizadeh, Nima; Rahmati, Mohammad H.

In: Energy Economics, Vol. 71, 01.03.2018, p. 171-185.

Research output: Contribution to journalArticle

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