The distributional effects of fuel taxes and public transportation in South Korea: an analysis using the quantile regression methods

We investigate the regressivity of fuel taxes in South Korea, focusing on the role of public transportation. Despite the growing body of literature on fuel tax regressivity, many studies focus on average effects, with limited attention given to the distribution of tax burdens across income groups. Using data from the Korean Household Income and Expenditure Survey and quantile regression models, we find that the fuel tax burden ratio in the lower-income level is widely distributed, indicating that regressivity is not uniformly severe as commonly believed. Such cases of reduced tax burdens among lower-income groups are significantly associated to public transit use, particularly in metropolitan areas. These findings highlight the importance of behavioural responses, such as increased reliance on public transit, in alleviating the impacts of fuel taxes. Policy implications also involve expanding public transit infrastructure and providing targeted support for public transit users. This comprehensive approach can help balance environmental objectives with social equity.