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Decentralization and fuel subsidies

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  • Ferraresi, Massimiliano
  • Kotsogiannis, Christos
  • Rizzo, Leonzio

Abstract

This paper explores the role of decentralization in explaining variation in fuel subsidies across countries. Using panel data over the period 1998-2008 and for 108 countries, it emerges that the effect of ‘decentralization’ (taken to be an increase in the number of government levels) broadly decreases both diesel and gasoline subsidies, with this effect being more pronounced when the level of political accountability is low. For developing countries, for which political accountability is low, decentralization decreases gasoline and diesel subsidies by at least 6.98% and 12.99%, respectively. For developed countries, for which political accountability is high, decentralization does not have any impact on both gasoline and diesel. What this evidence points to is that in developing economies, where voters are poorly informed and accountability is low, decentralization appears to be associated with lower fuel subsidies.

Suggested Citation

  • Ferraresi, Massimiliano & Kotsogiannis, Christos & Rizzo, Leonzio, 2018. "Decentralization and fuel subsidies," Energy Economics, Elsevier, vol. 74(C), pages 275-286.
    • Handle: RePEc:eee:eneeco:v:74:y:2018:i:c:p:275-286
    DOI: 10.1016/j.eneco.2018.05.031
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    2. Chen, Qiu & Huang, Jikun & Mirzabaev, Alisher, 2022. "Does fuel price subsidy work? Household energy transition under imperfect labor market in rural China," Energy Economics, Elsevier, vol. 107(C).
    3. Kheiravar, Khaled H, 2019. "Economic and Econometric Analyses of the World Petroleum Industry, Energy Subsidies, and Air Pollution," Institute of Transportation Studies, Working Paper Series qt3gj151w9, Institute of Transportation Studies, UC Davis.

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    More about this item

    Keywords

    Fuel-price subsidies; Multi-leveled governance; Federalism; Decentralization; Share responsibility;
    All these keywords.

    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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