A Comparative Analysis of Subsidy Reforms in the Middle East and North Africa Region

34 Pages Posted: 20 Jul 2016

See all articles by Abdelkrim Araar

Abdelkrim Araar

Université Laval - Département d'Économique

Paolo Verme

World Bank Group; University of Turin - Department of Economics

Date Written: July 20, 2016

Abstract

The paper compares the distribution of energy and food subsidies across households and the impact of subsidy reforms on household welfare in the Middle East and North Africa region. The analysis uses a unified model and harmonized household data. The results show that the distribution of subsidies and the welfare effects of subsidy reforms are quite diverse across countries and products. Energy subsidies tend to be pro-rich in terms of absolute amounts, but tend to be more important for the poor in terms of expenditure shares. Instead, food subsidies are larger for the poor in absolute and relative terms. These findings do not apply everywhere, and the scale of these phenomena are different across countries and products. The welfare effect of a 30 percent reduction in subsidies can be important, especially considering the cumulated effect across products, but the cost of compensating the loss in welfare for the poor is generally low compared with the budget benefits of decreasing subsidies.

Keywords: Public Sector Management and Reform, Energy and Environment, Economic Theory & Research, Economic Growth, Industrial Economics, Non Governmental Organizations, Energy and Mining, Energy Demand, Social Protections & Assistance, Economics and Institutions, Inequality

Suggested Citation

Araar, Abdelkrim and Verme, Paolo, A Comparative Analysis of Subsidy Reforms in the Middle East and North Africa Region (July 20, 2016). World Bank Policy Research Working Paper No. 7755, Available at SSRN: https://ssrn.com/abstract=2812303

Abdelkrim Araar (Contact Author)

Université Laval - Département d'Économique ( email )

CREFA
Ste-Foy, Quebec 179Que G1K
Canada

Paolo Verme

World Bank Group ( email )

Washington, DC 20433
United States

University of Turin - Department of Economics ( email )

Via Po, 53
Torino, 10124
Italy

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