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Poverty and social impact analysis of increased natural gas prices and selected social guarantees in Ukraine

Author

Listed:
  • Oleksandra Betliy
  • Veronika Movchan
  • Mykola Pugachov

Abstract

To date, prices of gas and other energy used by households in Ukraine have been generously subsidized by the Government. However, suppressed energy prices lead to excessive use of gas and an inefficient level of investment into energy savings. In addition, Ukraine’s dependence on imported gas contributes to trade imbalances and growing pressure on the devaluation of the national currency. Thus, the issue of raising gas prices remains critical for the population of Ukraine. In particular, this step was also envisaged in an ambitious reform agenda announced in mid-2010 aimed at restoring stable and high economic growth. However, this policy may have an unprecedented impact on the welfare of population. This paper presents the main findings from the simulation of gas price shocks, provides an overview of social support programs in Ukraine and analyses their efficiency. Based on the analyses, the paper draws two major conclusions. First, increases in gas prices result in welfare losses in all household categories, with a more profound impact on urban households. Second, the current social welfare programs are not very efficient in targeting the poorest households. Reform of the social welfare system is thus required to ensure a safety net for poor households in times of gas price hikes. In order to assist national decisionmakers in solving these issues the paper presents general policy recommendations.

Suggested Citation

  • Oleksandra Betliy & Veronika Movchan & Mykola Pugachov, 2013. "Poverty and social impact analysis of increased natural gas prices and selected social guarantees in Ukraine," Working Papers PMMA 2013-12, PEP-PMMA.
  • Handle: RePEc:lvl:pmmacr:2013-12
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    File URL: https://portal.pep-net.org/documents/download/id/21106
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    References listed on IDEAS

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    1. Jesper Jensen & Thomas Rutherford & David Tarr, 2014. "The Impact of Liberalizing Barriers to Foreign Direct Investment in Services: The Case of Russian Accession to the World Trade Organization," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 6, pages 125-149 World Scientific Publishing Co. Pte. Ltd..
    2. World Bank, 2007. "Ukraine Poverty Update," World Bank Other Operational Studies 19244, The World Bank.
    3. World Bank, 2005. "Ukraine : Poverty Assessment, Poverty and Inequality in a Growing Economy," World Bank Other Operational Studies 8803, The World Bank.
    4. John Cockburn & Erwin Corong & Caesar Cororaton, 2010. "Integrated Computable General Equilibrium (CGE) microsimulation approach," International Journal of Microsimulation, International Microsimulation Association, vol. 3(1), pages 60-71.
    5. Steven J. Keuning & Willem A. de Ruuter, 1988. "Guidelines To The Construction Of A Social Accounting Matrix," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(1), pages 71-100, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    gas price shock simulation; welfare programs; social support programs;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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