The Unequal Benefits of Fuel Subsidies A Review of Evidence for Developing Countries

This paper reviews evidence on the impact of fuel subsidy reform on household welfare in developing countries. On average, the burden of subsidy reform is neutrally distributed across income groups; a $0.25 decrease in the per liter subsidy results in a 6 percent decrease in income for all groups. M...

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Bibliographic Details
Main Author: Coady, David
Other Authors: Arze del Granado, Javier
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2010
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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300 |a 23 pages 
651 4 |a El Salvador 
653 |a Public Finance 
653 |a Wealth 
653 |a Consumption 
653 |a Energy: Demand and Supply 
653 |a Expenditure 
653 |a Redistributive Effects 
653 |a Price Level 
653 |a Taxation and Subsidies: Incidence 
653 |a Income 
653 |a Expenditures, Public 
653 |a Taxation, Subsidies, and Revenue: General 
653 |a Prices 
653 |a Saving 
653 |a Macroeconomics: Consumption 
653 |a Inflation 
653 |a Energy industries & utilities 
653 |a Fiscal Policies and Behavior of Economic Agents: Household 
653 |a Aggregate Factor Income Distribution 
653 |a Taxation and Subsidies: Externalities 
653 |a Fuel prices 
653 |a Environmental Taxes and Subsidies 
653 |a National accounts 
653 |a Macroeconomics 
653 |a Deflation 
653 |a Energy subsidies 
653 |a Economics 
700 1 |a Arze del Granado, Javier 
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520 |a This paper reviews evidence on the impact of fuel subsidy reform on household welfare in developing countries. On average, the burden of subsidy reform is neutrally distributed across income groups; a $0.25 decrease in the per liter subsidy results in a 6 percent decrease in income for all groups. More than half of this impact arises from the indirect impact on prices of other goods and services consumed by households. Fuel subsidies are a costly approach to protecting the poor due to substantial benefit leakage to higher income groups. In absolute terms, the top income quintile captures six times more in subsidies than the bottom. Issues that need to be addressed when undertaking subsidy reform are also discussed, including the need for a new approach to fuel pricing in many countries