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Ukraine Gas Pricing Policy: Distributional Consequences of Tariff Increases

  • Pritha Mitra
  • Ruben Atoyan
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    Ukraine’s gas pricing policy subsidizes gas and heating for all households. As the cost of imported gas rises, this policy increasingly weighs on government finances, sustains energy over-consumption, dampens investment in delivery systems, and undermines incentives for domestic production. However, gas price hikes have been deferred to the medium-term as they are politically unpopular. Through estimation of household demand functions by income quintiles to evaluate the distributional consequences of tarrif reform, this paper finds that tariff reforms combined with targeted social support can address the economic inefficiencies of the current pricing policy without large welfare costs to the lower income segments of the population.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/247.

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    Length: 23
    Date of creation: 15 Oct 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/247
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    1. Lutz Kilian, 2008. "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 871-909, December.
    2. Bentzen, Jan & Engsted, Tom, 1993. "Short- and long-run elasticities in energy demand : A cointegration approach," Energy Economics, Elsevier, vol. 15(1), pages 9-16, January.
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