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The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries

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Author Info

  • Arze del Granado, Francisco Javier
  • Coady, David
  • Gillingham, Robert

Abstract

This paper reviews evidence on the impact of fuel subsidy reform on household welfare in developing countries. On average, the burden of subsidy reform is substantial and is approximately neutrally distributed across income groups; a $0.25 decrease in the per liter subsidy results in a 5% decrease in income for all groups. More than half of this impact arises from the indirect impact on prices of other goods and services consumed by households. Fuel subsidies are a costly approach to protecting the poor due to substantial benefit leakage to higher income groups; in absolute terms, the top income quintile captures six times more in subsidies than the bottom.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 40 (2012)
Issue (Month): 11 ()
Pages: 2234-2248

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Handle: RePEc:eee:wdevel:v:40:y:2012:i:11:p:2234-2248

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Web page: http://www.elsevier.com/locate/worlddev

Related research

Keywords: fuel subsidies; welfare impact; distributional impact; subsidy reform;

References

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  1. Dominique M. Guillaume & Roman Zytek & Mohammad Reza Farzin, 2011. "Iran," IMF Working Papers 11/167, International Monetary Fund.
  2. John M. Piotrowski & David Coady & Justin Tyson & Rolando Ossowski & Robert Gillingham & Shamsuddin Tareq, 2010. "Petroleum Product Subsidies," IMF Staff Position Notes 2010/05, International Monetary Fund.
  3. Benedict F. W. Bingham & James Daniel & Giulio Federico, 2001. "Domestic Petroleum Price Smoothing in Developing and Transition Countries," IMF Working Papers 01/75, International Monetary Fund.
  4. Benedict CLEMENTS & Hong-Sang JUNG & Sanjeev GUPTA, 2007. "Real And Distributive Effects Of Petroleum Price Liberalization: The Case Of Indonesia," The Developing Economies, Institute of Developing Economies, vol. 45(2), pages 220-237.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. How Fuel Subsidies Around the World Burden the Rich and the Poor Alike, with Lessons for the US
    by Ed Dolan in Ed Dolan's Econ Blog on 2013-08-13 13:49:00
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Cited by:
  1. Solaymani, Saeed & Kari, Fatimah, 2014. "Impacts of energy subsidy reform on the Malaysian economy and transportation sector," Energy Policy, Elsevier, vol. 70(C), pages 115-125.
  2. Malla, Sunil & Timilsina, Govinda R, 2014. "Household cooking fuel choice and adoption of improved cookstoves in developing countries : a review," Policy Research Working Paper Series 6903, The World Bank.
  3. Paul J. Burke, 2014. "Green Pricing in the Asia Pacific: An Idea Whose Time Has Come?," CCEP Working Papers 1409, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.

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