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Fueling inequality: A novel estimate from large-scale reforms

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  • Mokhtari, MohammadAli
  • Ghoddusi, Hamed

Abstract

Recent estimates suggest that eliminating fossil fuel subsidies could prevent 1.6 million premature deaths annually by reducing air pollution, while also addressing the unequal distribution of resources. How unequal are the benefits of these subsidies? Using Iranian household expenditure data (1984–2019) covering three major subsidy reforms, this study estimates the inequality-reducing impact of replacing fuel subsidies with direct, universal, and unconditional cash transfers. Our robust estimates show that reallocating USD 1 per capita per day from fuel subsidies to direct cash transfers reduces the Gini coefficient of expenditure by 8 %. These findings underscore the redistributive potential of such reforms and their role in fostering more equitable and sustainable policy design.

Suggested Citation

  • Mokhtari, MohammadAli & Ghoddusi, Hamed, 2025. "Fueling inequality: A novel estimate from large-scale reforms," Journal of Environmental Economics and Management, Elsevier, vol. 134(C).
    • Handle: RePEc:eee:jeeman:v:134:y:2025:i:c:s009506962500124x
    DOI: 10.1016/j.jeem.2025.103240
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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