Publication: Understanding the Distributional Impacts of Increases in Fuel Prices on Poverty and Inequality in Paraguay
Loading...
Date
2022-12
ISSN
Published
2022-12
Editor(s)
Abstract
The recent global increases in fuel prices threaten the gains in poverty reduction that countries like Paraguay have achieved over the past few decades. Therefore, policy makers must understand the potential distributional impacts of increases in fuel prices to evaluate the implementation of alternative measures that could mitigate these impacts. This paper analyzes the potential effects of fuel prices on poverty and inequality in Paraguay. Using microsimulation methods and based on the Commitment to Equity framework, it estimates the impact of higher fuel prices on welfare, poverty, and inequality based on three scenarios: (a) increases in gasoline prices, (b) increases in diesel prices, and (c) simultaneous increases in gasoline and diesel prices. The results obtained suggest that the total impact of increasing fuel prices tends to be more regressive in Paraguay. At the same time, the results of the simulations indicate small effects on income inequality.
Link to Data Set
Citation
“Canavire Bacarreza, Gustavo; de Ervin, Lyliana Gayoso; Galeano, Juan José; Baquero, Juan Pablo. 2022. Understanding the Distributional Impacts of Increases in Fuel Prices on Poverty and Inequality in Paraguay. Policy Research Working Papers;10268. © World Bank. http://hdl.handle.net/10986/38434 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Intergenerational Income Mobility around the World(Washington, DC: World Bank, 2025-07-09)This paper introduces a new global database with estimates of intergenerational income mobility for 87 countries, covering 84 percent of the world’s population. This marks a notable expansion of the cross-country evidence base on income mobility, particularly among low- and middle-income countries. The estimates indicate that the negative association between income mobility and inequality (known as the Great Gatsby Curve) continues to hold across this wider range of countries. The database also reveals a positive association between income mobility and national income per capita, suggesting that countries achieve higher levels of intergenerational mobility as they grow richer.Publication The Future of Poverty(Washington, DC: World Bank, 2025-07-15)Climate change is increasingly acknowledged as a critical issue with far-reaching socioeconomic implications that extend well beyond environmental concerns. Among the most pressing challenges is its impact on global poverty. This paper projects the potential impacts of unmitigated climate change on global poverty rates between 2023 and 2050. Building on a study that provided a detailed analysis of how temperature changes affect economic productivity, this paper integrates those findings with binned data from 217 countries, sourced from the World Bank’s Poverty and Inequality Platform. By simulating poverty rates and the number of poor under two climate change scenarios, the paper uncovers some alarming trends. One of the primary findings is that the number of people living in extreme poverty worldwide could be nearly doubled due to climate change. In all scenarios, Sub-Saharan Africa is projected to bear the brunt, contributing the largest number of poor people, with estimates ranging between 40.5 million and 73.5 million by 2050. Another significant finding is the disproportionate impact of inequality on poverty. Even small increases in inequality can lead to substantial rises in poverty levels. For instance, if every country’s Gini coefficient increases by just 1 percent between 2022 and 2050, an additional 8.8 million people could be pushed below the international poverty line by 2050. In a more extreme scenario, where every country’s Gini coefficient increases by 10 percent between 2022 and 2050, the number of people falling into poverty could rise by an additional 148.8 million relative to the baseline scenario. These findings underscore the urgent need for comprehensive climate policies that not only mitigate environmental impacts but also address socioeconomic vulnerabilities.Publication Engineering Ukraine’s Wirtschaftswunder(Washington, DC: World Bank, 2025-07-29)As Ukraine emerges from the devastation of war, it faces a historic opportunity to engineer its own Wirtschaftswunder—a productivity-driven economic transformation akin to post-war West Germany. While investment-led growth may offer quick wins, it is efficiency, innovation, and institutional reform that will determine Ukraine’s long-term economic trajectory. Drawing on rich micro-level firm data spanning 25 years, this paper uncovers deep structural distortions that have suppressed creative destruction and productivity in Ukraine. It finds that business dynamism is on the decline, alongside rising market concentration among incumbent businesses, including low productivity state owned enterprises. To inform priorities for reviving business dynamism, this study develops a model of creative destruction drawing on Acemoglu et al. (2018) and Akcigit et al. (2021). The quantitative assessment highlights that policies that discipline entrenched incumbents are the bedrock for reviving business dynamism and engineer Ukraine’s Wirtschaftswunder. Policies targeting specific types of firms have limited efficacy when incumbents run wild.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Disentangling the Key Economic Channels through Which Infrastructure Affects Jobs(Washington, DC: World Bank, 2025-04-03)This paper takes stock of the literature on infrastructure and jobs published since the early 2000s, using a conceptual framework to identify the key channels through which different types of infrastructure impact jobs. Where relevant, it highlights the different approaches and findings in the cases of energy, digital, and transport infrastructure. Overall, the literature review provides strong evidence of infrastructure’s positive impact on employment, particularly for women. In the case of electricity, this impact arises from freeing time that would otherwise be spent on household tasks. Similarly, digital infrastructure, particularly mobile phone coverage, has demonstrated positive labor market effects, often driven by private sector investments rather than large public expenditures, which are typically required for other large-scale infrastructure projects. The evidence on structural transformation is also positive, with some notable exceptions, such as studies that find no significant impact on structural transformation in rural India in the cases of electricity and roads. Even with better market connections, remote areas may continue to lack economic opportunities, due to the absence of agglomeration economies and complementary inputs such as human capital. Accordingly, reducing transport costs alone may not be sufficient to drive economic transformation in rural areas. The spatial dimension of transformation is particularly relevant for transport, both internationally—by enhancing trade integration—and within countries, where economic development tends to drive firms and jobs toward urban centers, benefitting from economies scale and network effects. Turning to organizational transformation, evidence on skill bias in developing countries is more mixed than in developed countries and may vary considerably by context. Further research, especially on the possible reasons explaining the differences between developed and developing economies, is needed.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Modeling the Revenue and Distributional Effects of Tax Reform in Paraguay(World Bank, Washington, DC, 2021-06)In 2019, the Government of Paraguay (GOP) embarked on a comprehensive tax reform to simplify and modernize its tax system. At the request of the Ministry of Finance (MOF), and building on long-standing policy dialogue with the country, the World Bank (WB) Poverty team worked quickly to develop a micro-simulation tool to inform policymakers on the potential revenue and distributional effects of the reform as it was being developed. In this note, we summarize the context, approach, challenges, and lessons learned from constructing the Fiscal Simulation Tool and highlight the tool’s long-term value for policy dialogue and decision making.Publication Measures to Reduce the Economic and Social Impact of High Fuel Prices(Washington, DC, 2011)High volatility in the world prices of petroleum has been a characteristic feature of the global economy in the last decade. World petroleum prices increased four-fold between 2004 and 2008 and, and following a drop in prices in the second half of 2008, petroleum prices have been rising again, and they are several times higher than they were two decades ago. Since high and volatility of prices is likely to be a permanent feature of the global economy for the foreseeable future, they merit a reconsideration of the national transport and taxation policies that were put in place when fuel prices were not such a significant component of trade-related transactions costs in Sub-Saharan Africa (SSA) countries. Transport practices that were based on the assumption of low price of fuel are not sustainable, and policies neglect fuel efficiency considerations through lowering the fuel consumption of vehicles measures are no longer sustainable. Efficient and low transport cost is essential to achieve regional economic integration and strengthen Africa's competitiveness in external markets. Higher diesel prices also impact on the prices of all other goods which use diesel as an intermediate input. The most significant among them with implications for the poor in low-income developing countries is food, on which the poor spend a disproportionately high share of their total household expenditures. This report is in three parts in the first part, transport fuel prices in the countries of SSA are compared with those of other regions of the world. The comparison is not only in terms of the actual retail prices but also, but taking account of per capita incomes and truck revenues, also in terms of affordability. This Part also provides evidence of the make-up of transport fuel prices in SSA countries, as a first step in assessing how they can be dealt with. The second part provides new evidence of the impact of these high fuel prices on the export competiveness of a sample of six SSA countries. It also provides a shorter description of the results of a study of the impact of fuel prices on logistics costs in Central America, since so far there have not been any studies of the impact of high transport fuel prices on logistics and food costs in SSA countries. The third part deals with the ways in which the impact of high transport fuel prices can be addressed. Two main areas of action are described, those that would reduce the retail price of transport fuel and those that would increase fuel efficiency, so they impact of high prices would be reduced. This section focuses on diesel fuel, as this is by far the most used by the trucks that transport export products and are involved in domestic logistics. This section concludes with some ideas on what could be done next to make progress on implementing the most promising ideas for reducing the impact of high transport fuel prices.Publication The Impact of Credential Recognition(Washington, DC: World Bank, 2025-07-02)In 2020, amidst the COVID-19 crisis, the Peruvian government implemented a policy recognizing the foreign medical qualifications of immigrant health care workers. This study analyzes the labor market performance of Venezuelan health professionals with respect to other Venezuelans with university-level qualifications between 2018 and 2022. The findings show that health professionals experienced a marked improvement in their wages, significantly outperforming their fellow immigrants in sectors such as law and education. The analysis finds that compared to native Peruvian health professionals, Venezuelan health professionals experienced the highest positive impact on their income of all university-level professionals. However, although the effect is robust and statistically significant in the full sample and preferred specifications, it is not significant under alternative sampling restrictions. The study argues that the increased income of Venezuelan health professionals is related to the effectiveness of credential recognition policies in boosting the earnings of immigrants.Publication Understanding Vulnerability to Poverty and Natural Disasters in Latin America and the Caribbean(Washington, DC: World Bank, 2024-06-28)This paper provides the first measures of vulnerability to poverty in Latin America and the Caribbean at the household level looking at natural hazards such as floods, landslides, cyclones, earthquakes, and droughts. It considers seven countries in the region: Brazil, the Dominican Republic, Ecuador, El Salvador, Honduras, Mexico, and Peru. The paper constructs a unique data base that links household surveys from the Socio-Economic Database for Latin America and the Caribbean database to data on natural hazards from the ThinkHazard database and Emergency Events Database, which permits the first estimates of how household exposure to natural events raises the probability of being poor. The results suggest that vulnerability to poverty is related to households' coping and adaptation strategies, and there is great heterogeneity depending on the natural hazard assumed. The evidence generated by this approach helps in understanding the lack of coping mechanisms and adaptation strategies among vulnerable households. This understanding can be used to mitigate the effects of natural disasters. The evidence-based approach is useful for identifying specific vulnerable communities in disaster-prone areas. Furthermore, the information can be presented in the most disaggregated representative unit that the data allow so that policy makers can build more efficient management policies in their location.Publication Impacts on Poverty of Removing Fuel Import Subsidies in Nigeria(World Bank, Washington, DC, 2015-07)The petroleum sector contributes substantially to the Nigerian economy; however, the potential benefits are diminished because of the existence of significant subsidies on imports of petroleum products. Subsidies on imported petroleum products are considered to be an important instrument for keeping fuel prices, and hence the cost of living, low. The costs of these subsidies, however, have risen dramatically in recent years along with increased volatility in world petroleum and petroleum product prices and increased illegal exportation of subsidized petroleum products into neighboring countries. Removing the subsidy on fuel is one of the most contentious socioeconomic policy issues in Nigeria today. In this paper, an economy-wide framework is used to identify the impact of removing the fuel subsidy on the Nigerian economy and investigate how alternative policies might be used to meet socioeconomic objectives related to fuel subsidies. The results show that although a reduction in the subsidy generally results in an increase in Nigeria’s gross domestic product, it can have a detrimental impact on household income, and in particular on poor households. Accompanying the subsidy reduction with income transfers aimed at poor households or domestic production of petroleum products can alleviate the negative impacts on household income.
Users also downloaded
Showing related downloaded files
Error: Could not load results for 'https://openknowledge.worldbank.org/server/api/item/relateditemlistconfigs/bf69ff6c-ebb3-5153-aa93-4913651e24f7_downloads/itemlist'.