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Leveraging Fuel Subsidy Reform for Transition in Yemen

Author

Listed:
  • Clemens Breisinger

    () (International Food Policy Research Institute, Development Strategy and Governance Division, 2033 K St, NW Washington, DC 20006-1002, USA)

  • Wilfried Engelke

    () (The World Bank, 1818 H Street, NW Washington, DC 20433, USA)

  • Olivier Ecker

    () (International Food Policy Research Institute, Development Strategy and Governance Division, 2033 K St, NW Washington, DC 20006-1002, USA)

Abstract

Yemen is currently undergoing a major political transition, yet many economic challenges—including fuel subsidy reform—remain highly relevant. To inform the transition process with respect to a potential subsidy reform, we use a dynamic computable general equilibrium and microsimulation model for Yemen; we show that overall growth effects of subsidy reduction are positive in general, but poverty can increase or decrease depending on reform design. A promising strategy for a successful reform combines fuel subsidy reduction with direct income transfers to the poorest one-third of households during reform, and productivity-enhancing investment in infrastructure, plus fiscal consolidation. Public investments should be used for integrating economic spaces and restructuring of agricultural, industrial and service value chains in order to create a framework that encourages private-sector-led and job-creating growth.

Suggested Citation

  • Clemens Breisinger & Wilfried Engelke & Olivier Ecker, 2012. "Leveraging Fuel Subsidy Reform for Transition in Yemen," Sustainability, MDPI, Open Access Journal, vol. 4(11), pages 1-26, October.
  • Handle: RePEc:gam:jsusta:v:4:y:2012:i:11:p:2862-2887:d:21079
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    References listed on IDEAS

    as
    1. Ecker, Olivier & Breisinger, Clemens & McCool, Christen & Diao, Xinshen & Funes, Jose & You, Liangzhi & Yu, Bingxin, 2010. "Assessing food security in Yemen," IFPRI discussion papers 982, International Food Policy Research Institute (IFPRI).
    2. Breisinger, Clemens & Ecker, Olivier & Funes, Jose & Yu, Bingxin, 2010. "Food as the basis for development and security: A strategy for Yemen," IFPRI discussion papers 1036, International Food Policy Research Institute (IFPRI).
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    Citations

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    Cited by:

    1. Dartanto, Teguh, 2013. "Reducing fuel subsidies and the implication on fiscal balance and poverty in Indonesia: A simulation analysis," Energy Policy, Elsevier, vol. 58(C), pages 117-134.
    2. Saeed Solaymani, 2016. "Impacts of energy subsidy reform on poverty and income inequality in Malaysia," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(6), pages 2707-2723, November.
    3. Dennis, Allen, 2016. "Household welfare implications of fossil fuel subsidy reforms in developing countries," Energy Policy, Elsevier, vol. 96(C), pages 597-606.
    4. Solaymani, Saeed & Kari, Fatimah, 2014. "Impacts of energy subsidy reform on the Malaysian economy and transportation sector," Energy Policy, Elsevier, vol. 70(C), pages 115-125.

    More about this item

    Keywords

    fuel subsidy reform; development; poverty; Middle East; Northern Africa; Yemen;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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