The Incidence of Subsidies to Residential Public Services in Argentina: The Subsidy System in 2014 and Some Alternatives

Produced by: 
Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS)
Available from: 
August 2016
Paper author(s): 
Christoph Lakner
Maria Ana Lugo
Jorge Puig
Leandro Salinardi
Martha Viveros
Poverty - Inequality - Aid Effectiveness
Fiscal Policy - Public and Welfare Economics

More than a decade of energy and transport subsidies have weakened Argentina’s fiscal capacity. Following the 2001 crisis, public services tariffs were frozen in an attempt to offset the negative effects on households’ real purchasing power. However, these subsidies steadily increased over the years, particularly since 2006, becoming a significant fiscal burden. 2 Though subsidies can be a tool to protect the poor, in Argentina they led to distortions and a large share have been absorbed by upper classes and non-residential consumers. In 2015, electricity bills reflected less than 10% of production costs (Bidegaray, 2015), and lower tariffs have led to an increased demand of public services. Not only have energy and transport subsidies distorted both demand and supply, they have also not been efficiently targeted to the poor; instead, they have been distributed across all income groups, with the non-poor receiving the largest shares.


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