IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v168y2022ics0301421522003706.html
   My bibliography  Save this article

Cash instead of subsidy: Assessing the impact of the iranian energy subsidy reform on households

Author

Listed:
  • Zarepour, Zahra
  • Wagner, Natascha

Abstract

The 2010 energy subsidy reform in Iran is a unique case of redistributive policy as the savings from the subsidy cut have been redirected to households as unconditional, universal cash transfer. While theoretically, the cash transfer was large enough to keep the utility of the average household at the initial level, this study explores the practical impacts of the reform. We analyze panel data on income/expenditure of Iranian households for the period 2010–2012. Since this is a universal reform, we exploit the time dimension and the intensity of energy consumption in the identification and assess the robustness of the results with sub-sample and placebo analyses. Overall, the energy subsidy reform caused a significant shrinkage (7%–9%) in households' real consumption. The cash transfer failed to fully compensate the negative impact of the subsidy removal. The impact is heterogeneous, varying along the intensity of energy consumption, geographical location, income and the share of the cash transfer in a household's income. A non-negligible policy accomplishment of the reform is that within its first two years poverty was mitigated in absolute and relative terms and income inequality slightly improved. Nevertheless, the government is under pressure because inflation counteracts these gains.

Suggested Citation

  • Zarepour, Zahra & Wagner, Natascha, 2022. "Cash instead of subsidy: Assessing the impact of the iranian energy subsidy reform on households," Energy Policy, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:enepol:v:168:y:2022:i:c:s0301421522003706
    DOI: 10.1016/j.enpol.2022.113145
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421522003706
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2022.113145?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stéphane Gauthier & Taraneh Tabatabai, 2019. "How incentives matter? An illustration from the targeted subsidies reform in Iran," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 52(1), pages 97-125, January.
    2. Breton, Michèle & Mirzapour, Hossein, 2016. "Welfare implication of reforming energy consumption subsidies," Energy Policy, Elsevier, vol. 98(C), pages 232-240.
    3. Araar,Abdelkrim & Verme,Paolo, 2016. "A comparative analysis of subsidy reforms in the Middle East and North Africa Region," Policy Research Working Paper Series 7755, The World Bank.
    4. Khalili Araghi, Mansor & Barkhordari, Sajjad, 2012. "An evaluation of the welfare effects of reducing energy subsides in Iran," Energy Policy, Elsevier, vol. 47(C), pages 398-404.
    5. Paul J. Gertler & Sebastian Martinez & Patrick Premand & Laura B. Rawlings & Christel M. J. Vermeersch, 2016. "Impact Evaluation in Practice, Second Edition," World Bank Publications - Books, The World Bank Group, number 25030, December.
    6. Arze del Granado, Francisco Javier & Coady, David & Gillingham, Robert, 2012. "The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries," World Development, Elsevier, vol. 40(11), pages 2234-2248.
    7. Moshiri, Saeed, 2015. "The effects of the energy price reform on households consumption in Iran," Energy Policy, Elsevier, vol. 79(C), pages 177-188.
    8. Tuyen Quang Tran & Tinh Thanh Doan & Huong Van Vu & Hien Thi Nguyen, 2019. "Heterogeneous impacts of provincial governance on household welfare in Vietnam," International Journal of Social Welfare, John Wiley & Sons, vol. 28(2), pages 229-240, April.
    9. Paolo Verme, 2017. "Subsidy Reforms in the Middle East and North Africa Region: A Review," Natural Resource Management and Policy, in: Paolo Verme & Abdlekrim Araar (ed.), The Quest for Subsidy Reforms in the Middle East and North Africa Region, chapter 0, pages 3-31, Springer.
    10. Jie Yu & Xiao Han & Baozhen Chen & Jinzheng Ren, 2020. "Estimating the Impact of Poverty Alleviation Microcredit on the Income of Poor Households Using the Propensity Score Matching Method: Evidence from China," Agriculture, MDPI, vol. 10(7), pages 1-19, July.
    11. Lindström, Martin & Giordano, Giuseppe N., 2016. "The 2008 financial crisis: Changes in social capital and its association with psychological wellbeing in the United Kingdom – A panel study," Social Science & Medicine, Elsevier, vol. 153(C), pages 71-80.
    12. Hamidreza Ghorbani Dastgerdi & Zarinah Binti Yusof & Muhammad Shahbaz, 2018. "Nexus between economic sanctions and inflation: a case study in Iran," Applied Economics, Taylor & Francis Journals, vol. 50(49), pages 5316-5334, October.
    13. Susan Athey & Guido W. Imbens, 2017. "The State of Applied Econometrics: Causality and Policy Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 3-32, Spring.
    14. Gharibnavaz, Mohammad Reza & Waschik, Robert, 2015. "Food and energy subsidy reforms in Iran: A general equilibrium analysis," Journal of Policy Modeling, Elsevier, vol. 37(5), pages 726-741.
    15. Milu Muyanga & John Olwande & Esther Mueni & Stella Wambugu, 2010. "Free Primary Education in Kenya: An Impact Evaluation Using Propensity Score Methods," Working Papers PMMA 2010-08, PEP-PMMA.
    16. Abdolnaser Hemmati & Leili Niakan & Vida Varahrami, 2018. "The External Determinants of Inflation: The Case of Iran," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 22(3), pages 745-756, Summer.
    17. Hoyt Bleakley, 2007. "Disease and Development: Evidence from Hookworm Eradication in the American South," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 73-117.
    18. Djavad Salehi-Isfahani & Bryce Wilson Stucki & Joshua Deutschmann, 2015. "The Reform of Energy Subsidies in Iran: The Role of Cash Transfers," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(6), pages 1144-1162, November.
    19. Loek Groot & Thijs Oostveen, 2019. "Welfare effects of energy subsidy reform in developing countries," Review of Development Economics, Wiley Blackwell, vol. 23(4), pages 1926-1944, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mamipour, Siab & Salem, Ali Asghar & Sayadi, Mohammad & Azizkhani, Masoumeh, 2023. "Retail gasoline pricing in a subsidized energy market: An empirical analysis from AIDS model for Iran," Energy Policy, Elsevier, vol. 183(C).
    2. Gu, Jiafeng, 2023. "Energy poverty and government subsidies in China," Energy Policy, Elsevier, vol. 180(C).
    3. Zarepour, Zahra & Wagner, Natascha, 2023. "How manufacturing firms respond to energy subsidy reforms? An impact assessment of the Iranian Energy Subsidy Reform," Energy Economics, Elsevier, vol. 124(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xu, Shang & Zhang, Jun, 2023. "The welfare impacts of removing coal subsidies in rural China," Energy Economics, Elsevier, vol. 118(C).
    2. Aryanpur, V. & Ghahremani, M. & Mamipour, S. & Fattahi, M. & Ó Gallachóir, B. & Bazilian, M.D. & Glynn, J., 2022. "Ex-post analysis of energy subsidy removal through integrated energy systems modelling," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    3. Aiman Albatayneh & Adel Juaidi & Francisco Manzano-Agugliaro, 2023. "The Negative Impact of Electrical Energy Subsidies on the Energy Consumption—Case Study from Jordan," Energies, MDPI, vol. 16(2), pages 1-17, January.
    4. Groissböck, Markus & Pickl, Matthias J., 2018. "Fuel-price reform to achieve climate and energy policy goals in Saudi Arabia: A multiple-scenario analysis," Utilities Policy, Elsevier, vol. 50(C), pages 1-12.
    5. Timilsina, Govinda R. & Pargal, Sheoli, 2020. "Economics of energy subsidy reforms in Bangladesh," Energy Policy, Elsevier, vol. 142(C).
    6. Gelan, Ayele U., 2018. "Kuwait's energy subsidy reduction: Examining economic and CO2 emission effects with or without compensation," Energy Economics, Elsevier, vol. 71(C), pages 186-200.
    7. Mr. Kangni R Kpodar & Ms. Stefania Fabrizio & Kodjovi M. Eklou, 2019. "Export Competitiveness - Fuel Price Nexus in Developing Countries: Real or False Concern?," IMF Working Papers 2019/025, International Monetary Fund.
    8. Haqiqi, Iman & Yasharel, Sepideh, 2018. "Removing Fossil Fuel Subsidies to Help the Poor," MPRA Paper 95907, University Library of Munich, Germany.
    9. Griffiths, Steven, 2017. "A review and assessment of energy policy in the Middle East and North Africa region," Energy Policy, Elsevier, vol. 102(C), pages 249-269.
    10. Muhammad Atta-ul-Islam Abrar & Muhsin Ali & Uzma Bashir & Karim Khan, 2019. "Energy Pricing Policies and Consumers’ Welfare: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 24(1), pages 1-28, Jan-June.
    11. Bah, Muhammad Maladoh & Saari, M. Yusof, 2020. "Quantifying the impacts of energy price reform on living expenses in Saudi Arabia," Energy Policy, Elsevier, vol. 139(C).
    12. Taiebnia, Ali & Barkhordari, Sajjad, 2022. "The dismantling of reform policies in the Iranian energy sector," Energy Policy, Elsevier, vol. 161(C).
    13. Aryanpur, Vahid & Fattahi, Mahshid & Mamipour, Siab & Ghahremani, Mahsa & Gallachóir, Brian Ó & Bazilian, Morgan D. & Glynn, James, 2022. "How energy subsidy reform can drive the Iranian power sector towards a low-carbon future," Energy Policy, Elsevier, vol. 169(C).
    14. Ghosh, Probal P., 2022. "Impact of India's diesel subsidy reforms and pricing policy on growth and inflation," Energy Economics, Elsevier, vol. 113(C).
    15. Boudekhdekh, Karim, 2022. "A comparative analysis of energy subsidy in the MENA region," MPRA Paper 115275, University Library of Munich, Germany.
    16. Omotosho, Babatunde S., 2020. "Oil price shocks, fuel subsidies and macroeconomic (in)stability in Nigeria," MPRA Paper 105464, University Library of Munich, Germany.
    17. Behnam Ata & Parisa Pakrooh & Ayoub Barkat & Ramzi Benhizia & János Pénzes, 2022. "Inequalities in Regional Level Domestic CO 2 Emissions and Energy Use: A Case Study of Iran," Energies, MDPI, vol. 15(11), pages 1-26, May.
    18. Cecile Couharde & Sara Mouhoud, 2020. "Fossil Fuel Subsidies, Income Inequality, And Poverty: Evidence From Developing Countries," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 981-1006, December.
    19. Ghoddusi, Hamed & Morovati, Mohammad & Rafizadeh, Nima, 2022. "Dynamics of fuel demand elasticity: Evidence from Iranian subsidy reforms," Energy Economics, Elsevier, vol. 110(C).
    20. Soltani, Mohammad & Rahmani, Omeid & Ghasimi, Dara S.M. & Ghaderpour, Yousef & Pour, Amin Beiranvand & Misnan, Siti Hajar & Ngah, Ibrahim, 2020. "Impact of household demographic characteristics on energy conservation and carbon dioxide emission: Case from Mahabad city, Iran," Energy, Elsevier, vol. 194(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:168:y:2022:i:c:s0301421522003706. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.