The Unequal Benefits of Fuel Subsidies Revisited: Evidence for Developing Countries
IMF Working Papers, November 25, 2015
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Bibliographic details
- Authors: David Coady, Valentina Flamini, Louis Sears
- Published: November 25, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513501390.001
Summary
- 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.
Key findings
- A very large share of benefits from price subsidies accrues to high-income households, reinforcing existing income inequalities.
- Updated evidence covers a larger number of developing countries and incorporates more recent studies to refine estimates of welfare impacts by income group.
- The updated evidence can be used to approximate welfare impacts of subsidy reform in countries lacking the detailed data required for direct analysis.
Policy implications and relevance
- Reform design should account for the distributional consequences of fuel price subsidy removal, given the concentration of benefits among high-income households.
- Communicating the distributional impacts and using updated cross-country evidence can help build public support for subsidy reform.
- Where country-specific data are unavailable, the cross-country evidence in this paper can inform approximations of welfare impacts and help tailor mitigation measures or compensatory policies.
David Coady, Valentina Flamini, and Louis Sears. "The Unequal Benefits of Fuel Subsidies Revisited: Evidence for Developing Countries", IMF Working Paper No. 2015/250, November 25, 2015. DOI: https://doi.org/10.5089/9781513501390.001.
Content in this bundle
- Annex 1. Supplementary Tables