How Do Sectoral Interests Shape Distributive Politics? Evidence from Gasoline and Diesel Subsidy Reforms

Review of Policy Research, 2017

65 Pages Posted: 8 Aug 2017

Date Written: August 7, 2017

Abstract

Sectoral interests play an important role in distributive politics, but their influence is difficult to measure. We compare the effect of international oil prices on subsidies for domestic gasoline and diesel consumption. Because diesel is used by a smaller number of organized agricultural and transportation interests, they are more capable of collective action than the dispersed beneficiaries of gasoline subsidies. The conventional wisdom holds that sectoral interests could mobilize to stop reform (e.g., price increases, deregulation). Challenging this view, we consider the possibility that sectoral interests promote reform by facilitating the targeted allocation of compensation and exemptions. An empirical analysis of gasoline and diesel prices, 1991-2012, strongly supports the second hypothesis: diesel prices respond to international oil prices more strongly than do gasoline prices. Quantitative tests and case studies allow us to explore causal mechanisms, verify that the gasoline-diesel difference is related to actual policy reforms, and reject alternative explanations.

Keywords: distributive politics, special interest politics, policy reform, subsidies, energy policy

Suggested Citation

Blankenship, Brian and Urpelainen, Johannes, How Do Sectoral Interests Shape Distributive Politics? Evidence from Gasoline and Diesel Subsidy Reforms (August 7, 2017). Review of Policy Research, 2017. Available at SSRN: https://ssrn.com/abstract=3014722

Brian Blankenship

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Johannes Urpelainen (Contact Author)

Johns Hopkins SAIS ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

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