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Lifeline or Means-Testing? Electric Utility Subsidies in Honduras

Listed author(s):
  • Wodon, Quentin
  • Ajwad, Mohamed Ishan
  • Siaens, Corinne

Many countries around the world have implemented subsidies for utility consumption, especially in the case of water and electricity. Most subsidies take the form of a lifeline or increasing block tariff, whereby households that consume less pay less on a unit basis. The idea is that households with low consumption levels are likely to be poor, and some intervention is warranted to enable them to meet their basic needs (the lifeline) at an affordable cost. Whether such subsidies are successful at helping the poor is not clear. In this chapter we assess the targeting performance of a similar subsidy for electricity implemented in Honduras. The subsidy is targeted through the lifeline principle; however, because the consumption threshold for eligibility is relatively high (300 kWh per month), and because those with access to electricity tend to be less poor than those without access, the program’s overall performance is low in terms of poverty reduction. Targeting through means-testing rather than a lifeline, or at least a lower threshold for the lifeline, could help improve the impact of the subsidy, and based on experience in other countries, would not necessarily imply high administrative costs.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15419.

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Date of creation: 2003
Publication status: Published in Infrastructure for Poor People: Public Policy for Private Provision (2003): pp. 277-296
Handle: RePEc:pra:mprapa:15419
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  1. Clert, Carine & Wodon, Quentin, 2002. "The Targeting of Government Programs in Chile: A Quantitative and Qualitative Assessment," MPRA Paper 15414, University Library of Munich, Germany.
  2. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Poverty Measurement and Analysis," MPRA Paper 45362, University Library of Munich, Germany.
  3. Antonio Estache & V. Foster & Q. Wodon, 2002. "Accounting for Poverty in Infrastructure Reform: Learning from Latin America's Experience," ULB Institutional Repository 2013/44108, ULB -- Universite Libre de Bruxelles.
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