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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. Kristin Komives & Vivien Foster & Jonathan Halpern & Quentin Wodon, 2005. "Water, Electricity, and the Poor : Who Benefits from Utility Subsidies?," World Bank Publications, The World Bank, number 6361, January.
    2. AndrÈs GÛmez-Lobo & Dante Contreras, 2003. "Water Subsidy Policies: A Comparison of the Chilean and Colombian Schemes," World Bank Economic Review, World Bank Group, vol. 17(3), pages 391-407, December.
    3. 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.
    4. Angel-Urdinola, Diego & Cosgrove-Davies, Malcolm & Wodon, Quentin, 2006. "Rwanda: Electricity Tariff Reform," MPRA Paper 9044, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Hancevic, Pedro & Cont, Walter & Navajas, Fernando, 2016. "Energy populism and household welfare," Energy Economics, Elsevier, vol. 56(C), pages 464-474.
    2. Amadou Bassirou Diallo & Sudeshna Banerjee & Vivien Foster & Quentin Wodon, 2009. "Is Low Coverage of Modern Infrastructure Services in African Cities due to lack of Demand or lack of Supply ?," Post-Print hal-00405400, HAL.
    3. repec:eee:enepol:v:109:y:2017:i:c:p:782-793 is not listed on IDEAS
    4. Sadeghi, Mehdi & Ameli, Ahmad, 2012. "An AHP decision making model for optimal allocation of energy subsidy among socio-economic subsectors in Iran," Energy Policy, Elsevier, vol. 45(C), pages 24-32.
    5. Gisella ARAGÓN & José Luis BONIFAZ, 2013. "The water and sanitation service provision in Peru," CIRIEC Working Papers 1306, CIRIEC - Université de Liège.
    6. repec:wbk:wbpubs:13081 is not listed on IDEAS
    7. Komives, Kristin & Halpern, Jonathan & Foster, Vivien & Wodon, Quentin & Abdullah, Roohi, 2006. "The distributional incidence of residential water and electricity subsidies," Policy Research Working Paper Series 3878, The World Bank.
    8. Elena Bardasi & Quentin Wodon, 2008. "Who pays the most for water? Alternative providers and service costs in Niger," Economics Bulletin, AccessEcon, vol. 9(20), pages 1-10.
    9. Vagliasindi, Maria, 2012. "Implementing energy subsidy reforms : an overview of the key issues," Policy Research Working Paper Series 6122, The World Bank.
    10. Blanca Moreno-Dodson & Quentin Wodon, 2008. "Public Finance for Poverty Reduction : Concepts and Case Studies from Africa and Latin America," World Bank Publications, The World Bank, number 6881, January.
    11. Angel-Urdinola, Diego & Wodon, Quentin, 2008. "Assessing the Targeting Performance of Social Programs: Cape Verde," MPRA Paper 11072, University Library of Munich, Germany.
    12. Mariana Marchionni & Walter Sosa-Escudero & Javier Alejo, 2008. "Efectos Distributivos de Esquemas Alternativos de Tarifas Sociales: Una Exploración Cuantitativa," CEDLAS, Working Papers 0069, CEDLAS, Universidad Nacional de La Plata.
    13. Mimmi, Luisa M. & Ecer, Sencer, 2010. "An econometric study of illegal electricity connections in the urban favelas of Belo Horizonte, Brazil," Energy Policy, Elsevier, vol. 38(9), pages 5081-5097, September.
    14. Fernando Navajas Hancevic y & Pedro Hancevic, 2008. "Adaptación Tarifaria y Tarifa Social: Simulaciones para Gas Natural y Electricidad en el AMBA," Working Papers 96, FIEL.
    15. Angel-Urdinola, Diego & Cosgrove-Davies, Malcolm & Wodon, Quentin, 2006. "Rwanda: Electricity Tariff Reform," MPRA Paper 9044, University Library of Munich, Germany.
    16. Quentin Wodon, 2012. "Improving the Targeting of Social Programs in Ghana," World Bank Publications, The World Bank, number 13082, January.
    17. Barde, Julia Alexa & Lehmann, Paul, 2013. "Distributional effects of water tariff reforms: An empirical study for Lima, Peru," UFZ Discussion Papers 14/2013, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).

    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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