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Removing Fossil Fuel Subsidies to Help the Poor

Iman Haqiqi and Sepideh Yasharel

MPRA Paper from University Library of Munich, Germany

Abstract: Phasing out energy subsidies may increase the price of energy and adversely affect the poor. However, the households may benefit from the redistribution of the revenue from this policy in the economy. Here, we investigate the impacts of phasing out energy subsidies and direct transfer of the policy revenue to households. Employing a Computable General Equilibrium model, we measure the impacts on labor-leisure choice and on labor supply. Considering the Foster-Greer-Thorbecke index and the Food Ratio Method, we construct several poverty indices: the Gini index, the ratio of none-food expenditures to food expenditure, the ratio of income of the richest decile to the poorest decile, and the ratio of income of the two richest deciles to the two poorest deciles. We analyze the effects of an increase in energy prices and direct transfer of revenues to the households in the Iranian economy. The findings suggest a considerable improvement in income distribution and a significant improvement in food to non-food ratio. The results also show an improvement in rural-urban income distribution.

Keywords: food security; income distribution; poverty; computable general equilibrium (search for similar items in EconPapers)
JEL-codes: C68 D31 D58 D63 Q25 Q35 Q43 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-agr, nep-ara and nep-ene
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