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Distributional Effects of Oil Price Changeson Household Expenditures

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  • Kangni Kpodar

Abstract

Using an input-output approach, this paper assesses the distributional effects of a rise in various petroleum product prices in Mali. The results show that, although rising gasoline and diesel prices affect mainly nonpoor households, rising kerosene prices are most harmful to the poor. Overall, the impact of fuel prices on household budgets displays a U-shaped relationship with expenditure per capita. Regardless of the oil product considered, highincome households would benefit disproportionately from oil price subsidies. This suggests that a petroleum price subsidy is an ineffective mechanism for protecting the income of poor households compared with a targeted subsidy.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/91.

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Length: 33
Date of creation: 01 Mar 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/91

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Keywords: Oil; Subsidies; Oil prices; Income distribution; Oil subsidies; Taxation; oil products; international oil prices; oil consumption; petroleum products; crude oil; petroleum sector; higher oil prices; transport costs; petroleum prices; oil importers; domestic prices; oil price changes; crude oil prices; world oil prices; gasoline price; intermediate goods; imported goods; world prices; fuel prices; price liberalization; value-added tax; oil imports; average oil price; oil revenues; oil product prices; oil demand; transport cost; imported inputs; oil-producing countries; commodity prices; fuel products; domestic production; import price; exchange rate movements; foreign trade; fuel oil; trade taxes; petroleum pricing system; petroleum gas; value of imports; price control; overexploitation; domestic goods; fuel consumption; domestic margins; domestic demand; petroleum consumption; domestic price; fuel price; fuel tax; petroleum oil; petroleum pricing; opec; crude oil price; liquefied petroleum gas;

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  1. Abbas Valadkhani & William F. Mitchell, 2002. "Assessing the Impact of Changes in Petroleum Prices on Inflation and Household Expenditures in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(2), pages 122-132.
  2. John C.B. Cooper, 2003. "Price elasticity of demand for crude oil: estimates for 23 countries," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 27(1), pages 1-8, 03.
  3. McDonald, Scott & van Schoor, Melt, 2005. "A Computable General Equilibrium (CGE) Analysis of the Impact of an Oil Price Increase in South Africa," Working Paper Series 15633, PROVIDE Project.
  4. Gately, D. & Streifel, S.S., 1997. "The demand for Oil Products in Developing Countries," World Bank - Discussion Papers 359, World Bank.
  5. Benedict J. Clements & Sanjeev Gupta & Hong-Sang Jung, 2003. "Real and Distributive Effects of Petroleum Price Liberalization," IMF Working Papers 03/204, International Monetary Fund.
  6. Alves, Denisard C. O. & De Losso da Silveira Bueno, Rodrigo, 2003. "Short-run, long-run and cross elasticities of gasoline demand in Brazil," Energy Economics, Elsevier, vol. 25(2), pages 191-199, March.
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Cited by:
  1. Michael Plante, 2013. "The long–run macroeconomic impacts of fuel subsidies," Working Papers 1303, Federal Reserve Bank of Dallas.
  2. Mathew Adagunodo, 2013. "Petroleum Products Pricing Reform in Nigeria: Welfare Analysis from Household Budget Survey," International Journal of Energy Economics and Policy, Econjournals, vol. 3(4), pages 459 - 472.
  3. Ashokankur Datta, 2008. "The incidence of fuel taxation in India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-05, Indian Statistical Institute, New Delhi, India.
  4. Diagne, Youssoupha S & Diop, Mouhamadou M, 2007. "Quelles solutions à la hausse continue de la facture publique pétrolière : maintien des appuis à la consommation ou libre fixation des prix par le marché ?
    [Impact of energy subsidies withdraw
    ," MPRA Paper 54807, University Library of Munich, Germany.
  5. AydIn, Levent & Acar, Mustafa, 2011. "Economic impact of oil price shocks on the Turkish economy in the coming decades: A dynamic CGE analysis," Energy Policy, Elsevier, vol. 39(3), pages 1722-1731, March.
  6. Rodriguez, U-Primo E., 2007. "State-of-the-Art in Regional Computable General Equilibrium Modelling with a Case Study of the Philippines," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 20(1).
  7. Michael Plante Author-X-Name-First: Michael Author-X-Name-Last: Plante, 2013. "TheLong-RunMacroeconomicImpactsofFuelSubsidies," Caepr Working Papers 2013-002, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.

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