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

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. 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. This report starts by analyzing the incidence of the 2014 system of residential federal subsidies to residential public services (defined as electricity, gas, water and transport) building on the work by Puig and Salinardi (2015). This paper consists of six main sections. Section two presents the results on the incidence of subsidies to public services. Section three simulates the distributional impacts of alternative systems for electricity, gas and transport subsidies. Section four concludes. The methodological Appendix provides full details of the methods and data used in this paper