Time: 2023/05/19, 14:00 – 15:30 (Beijing Time)
Title: Price Stabilization Policy, Gasoline Consumption, and Health Externality: Evidence from Brazil
About the speaker:
Edson Severnini is an Associate Professor of Economics and Public Policy at Carnegie Mellon University (Heinz College), a Research Associate at the National Bureau of Economic Research (NBER), and a Research Affiliate at the Institute of Labor Economics (IZA). His research interests lie at the intersection of Energy and Environmental Economics, Economic History, and Labor Economics. His work focuses on examining the impacts of the expansion of energy access, pollution, and environmental regulation on local development, health outcomes, and firm behavior since the age of electrification in the United States. He is also interested on the impacts of climate change on air pollution, electricity generation, and infectious disease, the effects of economic activity on environmental outcomes, and on racial issues in local labor markets and in higher education.
Abstract:
Petroleum product price controls are often justified as a means to curb inflation and/or help the poor cope with the adverse effects of higher oil prices. Notwithstanding, a price ceiling for petroleum products may lead to negative health externalities. In this study, we examine the impacts of gasoline price stabilization policies on vehicle fuel demand, air pollution, and infant health across municipalities in Brazil over the period 2005-2016. To estimate the causal effects of interest, we leverage comprehensive data and an instrumental variables approach based on refinery oil prices and sugarcane quality. We have three main findings. First, gasoline consumption has become more responsive to prices over time, likely due to the diffusion of flexible-fuel vehicles. Second, gasoline consumption generates sizable negative externalities in terms of both higher local air pollution and higher pediatric hospitalization for respiratory conditions. Third, back-of-the-envelope calculations indicate that such externalities reinforce the public sector deficit generated by gasoline price stabilization policies. On the one hand, direct price control at the federally-owned oil company reduces federal corporate revenue, and fuel tax reduction lowers federal tax revenue. On the other hand, the additional pollution-driven hospitalizations are mostly paid for by the federal government through the publicly-funded universal health care system. Thus, not only federal revenue decreases, but also federal spending increases.
