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Do Utility Subsidies Reach the Poor? Framework and Evidence for Cape Verde, Sao Tome, and Rwanda

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Listed:
  • Diego Angel-Urdinola

    (World Bank)

  • Quentin Wodon

    (World Bank)

Abstract

This article provides a simple framework to analyze the determinants of targeting performance of utility tariffs and applies it to data on electricity in Cape Verde, Rwanda, and Sao Tome and Principe. While most indicators of benefit incidence are silent as of why subsidies are targeted the way they are (they only give an idea as to whether they reach the poor or not and to what extent), we develop a simple decomposition that allows analyzing both “access” and “subsidy-design” factors that influence the targeting performance of subsidies. Our findings suggest that consumption subsidies for electricity in Cape Verde, Rwanda, and Sao Tome and Principe are regressive in large part due to access factors that prevent the poor from using the services. We then conduct simulations to quantify how much targeting performance could be enhanced by changing tariff-structures as well as subsidizing connections instead of consumption.

Suggested Citation

  • Diego Angel-Urdinola & Quentin Wodon, 2007. "Do Utility Subsidies Reach the Poor? Framework and Evidence for Cape Verde, Sao Tome, and Rwanda," Economics Bulletin, AccessEcon, vol. 9(4), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-06i30004
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    References listed on IDEAS

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    1. Francois Bourguignon & Luiz A. Pereira da Silva, 2003. "The Impact of Economic Policies on Poverty and Income Distribution : Evaluation Techniques and Tools," World Bank Publications - Books, The World Bank Group, number 15090, December.
    2. Kristin Komives & Vivien Foster & Jonathan Halpern & Quentin Wodon, 2005. "Water, Electricity, and the Poor : Who Benefits from Utility Subsidies?," World Bank Publications - Books, The World Bank Group, number 6361, December.
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    6. Quentin Wodon & Shlomo Yitzhaki, 2002. "Evaluating the Impact of Government Programs on Social Welfare: The Role of Targeting and the Allocation Rules Among Program Beneficiaries," Public Finance Review, , vol. 30(2), pages 102-123, March.
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    More about this item

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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