Conference Paper
Inequality and Energy Subsidies Reform: Insights from the Largest Cash Transfer in the Developing World
No.
ERF30_38
Publisher
ERF
Date
March, 2024
We study the distributional effect of one of the largest global subsidy reforms, which replaced more than 40 billion USD annual energy subsidies with universal cash transfers in Iran. Using a novel identification strategy, we find a significant redistribution effect that has not been documented in previous studies. The reform led to an increase in expenditures for the bottom 70 and a decrease in expenditures for the top 20. Lower deciles experience greater expenditure growth, as large as 30% growth in the bottom 10. The Gini index also decreased by 14 percent. Our study identifies cash transfers as the main source of variation in the inequality measures over time. We estimate that one USD daily cash transfer to each individual, instead of energy subsidy, leads to an 8 percent decrease in the Gini Index. These results inform policy debates on energy policy and public finance.
Authors
Mohammadali Mokhtari
PhD candidate, University of Lugano
Research Fellows
Hamed Ghoddusi
Assistant Professor of Finance, Orfalea College of...