Distributional impacts of energy cross-subsidization in transition economies: evidence from Belarus

Corbett Grainger, Fan Zhang and Andrew William Schreiber

No 7385, Policy Research Working Paper Series from The World Bank

Abstract: Subsidies and cross-subsidies in the energy sector are common throughout Eastern Europe and Central Asia. In Belarus, revenues from an industrial tariff on electricity are used to cross-subsidize heating for households. Input-output (IO) data and a household consumption survey are used to analyze the distributional impacts of this cross-subsidization. This paper illustrates cost shares and electricity-intensity of different sectors and consumption categories and uses the IO data to obtain first-order estimates of the distributional incidence of policy reform. The paper then analyzes distributional impacts of subsidy reform with a Computable General Equilibrium model. Although poorer households benefit from reduced heating costs, the increase in prices of other consumer goods due to higher electricity prices more than offsets the benefits they receive from the subsidies. The analysis finds that the current cross-subsidies are regressive, and policy reform would be highly progressive.

Keywords: Transport Economics Policy&Planning; Energy Production and Transportation; Economic Theory&Research; Emerging Markets; Markets and Market Access (search for similar items in EconPapers)
Date: 2015-08-06
New Economics Papers: this item is included in nep-agr, nep-ene, nep-reg and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:7385

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