Energy Subsidies and Public Social Spending : Theory and Evidence / Christian Ebeke, Constant Lonkeng Ngouana.

Format:

Book

Government document

Author/Creator:

Ebeke, Christian.

Contributor:

Lonkeng Ngouana, Constant.

Series:

IMF Working Papers; Working Paper ; No. 2015/101

IMF Working Papers

Language:

English

Subjects (All):

Energy policy--Developing countries.

Expenditures, Public--Econometric models.

Power resources--Subsidies--Case studies.

Social policy--Economic aspects--Developing countries.

Local Subjects:

Energy policy--Developing countries.

Expenditures, Public--Econometric models.

Power resources--Subsidies--Case studies.

Social policy--Economic aspects--Developing countries.

Physical Description:

1 online resource (53 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2015.

Language Note:

English

Summary:

This paper shows that high energy subsidies and low public social spending can emerge as an equilibrium outcome of a political game between the elite and the middle-class when the provision of public goods is subject to bottlenecks, reflecting weak domestic institutions. We test this and other predictions of our model using a large cross-section of emerging markets and low-income countries. The main empirical challenge is that subsidies and social spending could be jointly determined (e.g., at the time of the budget), leading to a simultaneity bias in OLS estimates. To address this concern, we adopt an identification strategy whereby subsidies in a given country are instrumented by the level of subsidies in neighboring countries. Our Instrumental Variable (IV) estimations suggest that public expenditures in education and health were on average lower by 0.6 percentage point of GDP in countries where energy subsidies were 1 percentage point of GDP higher. Moreover, we find that the crowding-out was stronger in the presence of weak domestic institutions, narrow fiscal space, and among the net oil importers.

Contents:

Cover Page; Title Page; Copyright Page; Contents; Appendices; Tables; Figures; I. Introduction; II. The Political Game; A. Economic Environment; B. The Game and its Equilibrium; 1. Set-up and Timing of Events; 2. Solving the Game (Backward Induction); III. Empirical Analysis; A. Data Description and Stylized Facts; 1. Data Description: Energy Subsidies and Social Spending; 2. Stylized Facts; 1. Change in Subsidies and Social Spending across Regions Between 2002-2006 and 2007-2011; 2. Energy Subsidies and Social Spending across Countries: What has Happened?; B. Econometric Analysis

1. Model Specification2. Why Adopt a Cross-sectional Specification?; 3. Identification Strategy: Addressing the Endogeneity of Subsidies; 4. Estimation Results; 1. Energy Subsidies and Social Spending: The Role of Fiscal Space and Institutions; IV. Conclusion and Policy Implications; 2. List of Countries in the Sample; 3. Evolution of Commodity Prices; 4. Energy Subsidies Intensity around the Globe (2006 vs. 2011); 5. Energy Subsidies Intensity: Zoom on the MENA Region (2006 vs. 2011); References; Footnotes

Notes:

Description based upon print version of record.

Description based on print version record.

ISBN:

9781475552232

1475552238

9781475516364

1475516363