IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/3878.html
   My bibliography  Save this paper

The distributional incidence of residential water and electricity subsidies

Author

Listed:
  • Komives, Kristin
  • Halpern, Jonathan
  • Foster, Vivien
  • Wodon, Quentin
  • Abdullah, Roohi

Abstract

Subsidies to residential utility customers are popular among policymakers, utility managers, and utility customers alike, but they are nonetheless the subject of much controversy. Utility subsidies are seen as a way to help make utility service affordable for poor households and as an alternative mechanism for income redistribution. These arguments in favor of subsidies are countered by serious concerns about their adverse effects on consumer behavior, utility operations, and the financial health of utilities. Both the affordability and redistributive arguments for subsidies are based on the presumption that poor households benefit disproportionately from water and electricity subsidies, that they are well-targeted to the poor. The authors test this assumption by examining the extent to which the poor benefit from consumption and connection subsidies for water and electricity services. Their analysis of a wide range of subsidy models from around the developing world shows that the most common form of utility subsidy-quantity-based subsidies delivered through the tariff structure-are highly regressive. Geographically targeted or means-tested subsidies do better, and in many cases have a progressive incidence, but large numbers of poor households remain excluded. Low levels of coverage and metering severely limit the effectiveness of consumption subsidy schemes to reach the poor. Simulations suggest that connection subsidies are an attractive alternative for low coverage areas, but only if utilities have the means and motivation to extend network access to poor households and only if those households choose to connect.

Suggested Citation

  • Komives, Kristin & Halpern, Jonathan & Foster, Vivien & Wodon, Quentin & Abdullah, Roohi, 2006. "The distributional incidence of residential water and electricity subsidies," Policy Research Working Paper Series 3878, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3878
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/04/05/000012009_20060405124412/Rendered/PDF/wps38780rev0pdf.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. David Coady & Margaret Grosh & John Hoddinott, 2004. "Targeting of Transfers in Developing Countries : Review of Lessons and Experience," World Bank Publications, The World Bank, number 14902, April.
    2. Wodon, Quentin & Ajwad, Mohamed Ishan & Siaens, Corinne, 2003. "Lifeline or Means-Testing? Electric Utility Subsidies in Honduras," MPRA Paper 15419, University Library of Munich, Germany.
    3. Diego Angel-Urdinola & Quentin Wodon, 2007. "Do Utility Subsidies Reach the Poor? Framework and Evidence for Cape Verde, Sao Tome, and Rwanda," Economics Bulletin, AccessEcon, vol. 9(4), pages 1-7.
    4. Komives, Kristin, 1999. "Designing pro-poor water and sewer concessions : early lessons from Bolivia," Policy Research Working Paper Series 2243, The World Bank.
    5. repec:ebl:ecbull:v:9:y:2007:i:4:p:1-7 is not listed on IDEAS
    6. Vivien Foster & Maria Caridad Araujo, 2004. "Does infrastructure reform work for the poor? A case study from Guatemala," Policy Research Working Paper Series 3185, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jorge Martinez-Vazquez, 2007. "Budget Policy and Income Distribution," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0707, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. repec:eee:enepol:v:109:y:2017:i:c:p:782-793 is not listed on IDEAS
    3. Whittington, Dale & Nauges, Céline & Fuente, David & Wu, Xun, 2015. "A diagnostic tool for estimating the incidence of subsidies delivered by water utilities in low- and medium-income countries, with illustrative simulations," Utilities Policy, Elsevier, vol. 34(C), pages 70-81.
    4. repec:eee:enepol:v:106:y:2017:i:c:p:255-265 is not listed on IDEAS
    5. Felgendreher, Simon & Lehmann, Paul, 2012. "The political economy of the peruvian urban water sector," UFZ Discussion Papers 18/2012, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    6. Lehmann, Paul, 2011. "Making water affordable to all: A typology and evaluation of options for urban water pricing," UFZ Discussion Papers 10/2011, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    7. Dennis Wichelns, 2013. "Enhancing the performance of water prices and tariff structures in achieving socially desirable outcomes," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 29(3), pages 310-326, September.
    8. Gassmann, Franziska, 2014. "Switching the lights off: The impact of energy tariff increases on households in the Kyrgyz Republic," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 755-769.
    9. Monteiro, Henrique, 2008. "Evolution of cost recovery levels in the Portuguese water supply and wastewater industry 1998-2005," MPRA Paper 11490, University Library of Munich, Germany.
    10. Barde, Julia Alexa & Lehmann, Paul, 2013. "Distributional effects of water tariff reforms: An empirical study for Lima, Peru," UFZ Discussion Papers 14/2013, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).

    More about this item

    Keywords

    Economic Theory&Research; Town Water Supply and Sanitation; Tax Law; Urban Water Supply and Sanitation; Energy Production and Transportation;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:3878. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.