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Sectoral and macroeconomic implications of reducing implicit power sector subsidies in developing countries: Insights from Ethiopia

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  • Yalew, Amsalu Woldie

Abstract

Policy reforms targeting implicit subsidies to public power utilities are expected to have repercussions on the electricity sector, as well as the rest of the economy. This study aims to glean insights into the potential direct and indirect effects of reforming implicit power sector subsidies in the context of low-income countries. Using a computable general equilibrium (CGE) model, it is demonstrated that a hypothetical reduction in implicit subsidies in Ethiopia would increase the share of off-grid sources in the total electricity supply and enhance production efficiency in the grid electricity sector, with no substantial impact on GDP.

Suggested Citation

  • Yalew, Amsalu Woldie, 2026. "Sectoral and macroeconomic implications of reducing implicit power sector subsidies in developing countries: Insights from Ethiopia," Utilities Policy, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:juipol:v:98:y:2026:i:c:s0957178725002255
    DOI: 10.1016/j.jup.2025.102110
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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