The Unequal Benefits of Fuel Subsidies Revisited: Evidence for Developing Countries

David Coady, Valentina Flamini and Louis Sears

No 2015/250, IMF Working Papers from International Monetary Fund

Abstract: Understanding who benefits from fuel price subsidies and the welfare impact of increasing fuel prices is key to designing, and gaining public support for, subsidy reform. This paper updates evidence for developing countries on the magnitude of the welfare impact of subsidy reform and its distribution across income groups, incorporating more recent studies and expanding the number of countries. These studies confirm that a very large share of benefits from price subsidies goes to high-income households, further reinforcing existing income inequalities. The results can also help to approximate the welfare impact of subsidy reform for countries where the data necessary for such an analysis is not available.

Keywords: WP; price; fuel price; tax; income group; estimate; Fuel subsidy reform; welfare impact; distribution; developing countries; price-smoothing rule; price-shifting model; price change; transfer program; sequence price; price pass-through; electricity connection cost; kerosene price; price subsidy; fiscal cost; price volatility; price movement; Fuel prices; Inflation; Energy subsidies; Consumption; Income; Middle East; Middle East and Central Asia; North Africa; East Africa; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 25
Date: 2015-11-25
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Citations: View citations in EconPapers (40)

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