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Do Utility Subsidies Reach the Poor? Framework and Evidence for Cape Verde, Sao Tome, and Rwanda

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  • Diego Angel-Urdinola

    (World Bank)

  • Quentin Wodon

    (World Bank)

Abstract

This article provides a simple framework to analyze the determinants of targeting performance of utility tariffs and applies it to data on electricity in Cape Verde, Rwanda, and Sao Tome and Principe. While most indicators of benefit incidence are silent as of why subsidies are targeted the way they are (they only give an idea as to whether they reach the poor or not and to what extent), we develop a simple decomposition that allows analyzing both “access” and “subsidy-design” factors that influence the targeting performance of subsidies. Our findings suggest that consumption subsidies for electricity in Cape Verde, Rwanda, and Sao Tome and Principe are regressive in large part due to access factors that prevent the poor from using the services. We then conduct simulations to quantify how much targeting performance could be enhanced by changing tariff-structures as well as subsidizing connections instead of consumption.

Suggested Citation

  • Diego Angel-Urdinola & Quentin Wodon, 2007. "Do Utility Subsidies Reach the Poor? Framework and Evidence for Cape Verde, Sao Tome, and Rwanda," Economics Bulletin, AccessEcon, vol. 9(4), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-06i30004
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    References listed on IDEAS

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    1. AndrÈs GÛmez-Lobo & Dante Contreras, 2003. "Water Subsidy Policies: A Comparison of the Chilean and Colombian Schemes," The World Bank Economic Review, World Bank, vol. 17(3), pages 391-407, December.
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    More about this item

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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