Energy Subsidy Reform and Poverty in Arab Countries: A Comparative CGE‐Microsimulation Analysis of Egypt and Jordan

25 Pages Posted: 26 Oct 2018

See all articles by John Cockburn

John Cockburn

Partnership for Economic Policy (PEP); Université Laval; Partnership for Economic Policy (PEP)

Véronique Robichaud

Université Laval

Luca Tiberti

Université Laval

Date Written: October 2018

Abstract

This study simulates the macroeconomic and distributive impacts of real proposed (by local policy makers) energy subsidy reforms in Egypt and Jordan. To do that, we develop a dynamic CGE‐microsimulation model that is able to reconcile the general equilibrium effects of the reform and the individual‐ and household‐specific distributive effects. While the nature of the proposed reforms differs in the two countries, the study underscores the need, in both countries, for reform to generate fiscal savings to boost private investment and increase economic growth. It also shows that the reform alone would further exacerbate poverty through increased consumer prices. However, a modest reinvestment of fiscal savings into cash transfers creates a win‐win scenario of reduced poverty without significantly sacrificing the fiscal and growth benefits from the reform. Impacts (prices, growth, fiscal savings, poverty) are greater in Egypt due to the extent of proposed reforms and the fact that a larger share of the energy products concerned are consumed directly by households, while in Jordan the major effects come from the increase in intermediate input costs which generate a fall in the aggregate demand and, so, in labor demand.

Keywords: CGE‐microsimulation model, Egypt, energy subsidy reform, Jordan, poverty

JEL Classification: D58, C50, I32, O57, H2

Suggested Citation

Cockburn, John and Robichaud, Véronique and Tiberti, Luca, Energy Subsidy Reform and Poverty in Arab Countries: A Comparative CGE‐Microsimulation Analysis of Egypt and Jordan (October 2018). Review of Income and Wealth, Vol. 64, pp. S249-S273, 2018. Available at SSRN: https://ssrn.com/abstract=3273049 or http://dx.doi.org/10.1111/roiw.12309

John Cockburn (Contact Author)

Partnership for Economic Policy (PEP) ( email )

P.O. Box 30772-00100
ICIPE - Duduville Campus, Kasarani
Nairobi
Kenya

Université Laval ( email )

Dept. of Economics
Québec, Quebec G1V 0A6
Canada

Partnership for Economic Policy (PEP) ( email )

Duduville Campus, Kasarani
P.O. Box 30772-00100
Nairobi
Kenya

Véronique Robichaud

Université Laval

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

Luca Tiberti

Université Laval ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

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