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Leveraging Fuel Subsidy Reform for Transition in Yemen

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Author Info

  • Clemens Breisinger

    ()
    (International Food Policy Research Institute, Development Strategy and Governance Division, 2033 K St, NW Washington, DC 20006-1002, USA)

  • Wilfried Engelke

    ()
    (The World Bank, 1818 H Street, NW Washington, DC 20433, USA)

  • Olivier Ecker

    ()
    (International Food Policy Research Institute, Development Strategy and Governance Division, 2033 K St, NW Washington, DC 20006-1002, USA)

Abstract

Yemen is currently undergoing a major political transition, yet many economic challenges—including fuel subsidy reform—remain highly relevant. To inform the transition process with respect to a potential subsidy reform, we use a dynamic computable general equilibrium and microsimulation model for Yemen; we show that overall growth effects of subsidy reduction are positive in general, but poverty can increase or decrease depending on reform design. A promising strategy for a successful reform combines fuel subsidy reduction with direct income transfers to the poorest one-third of households during reform, and productivity-enhancing investment in infrastructure, plus fiscal consolidation. Public investments should be used for integrating economic spaces and restructuring of agricultural, industrial and service value chains in order to create a framework that encourages private-sector-led and job-creating growth.

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Bibliographic Info

Article provided by MDPI, Open Access Journal in its journal Sustainability.

Volume (Year): 4 (2012)
Issue (Month): 11 (October)
Pages: 2862-2887

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Handle: RePEc:gam:jsusta:v:4:y:2012:i:11:p:2862-2887:d:21079

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Related research

Keywords: fuel subsidy reform; development; poverty; Middle East; Northern Africa; Yemen;

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References

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  1. Breisinger, Clemens & Ecker, Olivier & Funes, Jose & Yu, Bingxin, 2010. "Food as the basis for development and security: A strategy for Yemen," IFPRI discussion papers 1036, International Food Policy Research Institute (IFPRI).
  2. Ecker, Olivier & Breisinger, Clemens & McCool, Christen & Diao, Xinshen & Funes, Jose & You, Liangzhi & Yu, Bingxin, 2010. "Assessing food security in Yemen," IFPRI discussion papers 982, International Food Policy Research Institute (IFPRI).
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Cited by:
  1. Teguh Dartanto, 2012. "Reducing Fuel Subsidies and the Implication on Fiscal Balance and Poverty in Indonesia: A Simulation Analysis," Working Papers in Economics and Business 201206, Faculty of Economics, University of Indonesia, revised May 2012.
  2. 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.

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