Impact of Mexico's energy reform on consumer welfare

Abstract

We study the impact of Mexico's energy reform on the welfare of electricity, liquified petroleum gas, and gasoline consumers between 2010 and 2018. We utilize micro-level data to estimate income and price elasticities. Comparative statics are used to determine subsidy and price influences on consumer surplus. A counterfactual is used to simulate the industry's behavior under non-reform parameters. Data cover ten income deciles and sociodemographic characteristics in the National Survey of Household Income and Expenditure. We conclude that consumers of energy goods in the post-reform experimental group (2014–2018) experienced a welfare gain compared to consumers in the control group (2010–2014) at the expense of alternative social costs related to energy subsidies.