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The Reform of Energy Subsidies in Iran: The Role of Cash Transfers

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  • Djavad Salehi-Isfahani
  • Bryce Wilson Stucki
  • Joshua Deutschmann

Abstract

We study Iran’s energy subsidy reform program of 2010 and argue that the key to its success was a cash transfer intended to compensate households for price increases. We use survey data from the first three months of the program, before other economic shocks confounded the picture, to study the program’s effect on the incomes and expenditures of households. We find that rural families that had less access to banks actually participated in greater numbers; that the poorest and richest income deciles participated least; and that, at least in its early phase, the program’s net effect was pro-poor. We argue this last fact explains the program’s smooth start.

Suggested Citation

  • Djavad Salehi-Isfahani & Bryce Wilson Stucki & Joshua Deutschmann, 2015. "The Reform of Energy Subsidies in Iran: The Role of Cash Transfers," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(6), pages 1144-1162, November.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:6:p:1144-1162
    DOI: 10.1080/1540496X.2015.1080512
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    Cited by:

    1. Rose, Julian & Ankel-Peters, Jörg & Hodel, Hanna & Sall, Medoune & Bensch, Gunther, 2024. "Lost in transition: The decline of LPG usage and the charcoal renaissance in urban Senegal," Ruhr Economic Papers 1076, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Mamipour, Siab & Salem, Ali Asghar & Sayadi, Mohammad & Azizkhani, Masoumeh, 2023. "Retail gasoline pricing in a subsidized energy market: An empirical analysis from AIDS model for Iran," Energy Policy, Elsevier, vol. 183(C).
    3. Cecile Couharde & Sara Mouhoud, 2020. "Fossil Fuel Subsidies, Income Inequality, And Poverty: Evidence From Developing Countries," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 981-1006, December.
    4. Omotosho, Babatunde S., 2020. "Oil price shocks, fuel subsidies and macroeconomic (in)stability in Nigeria," MPRA Paper 105464, University Library of Munich, Germany.
    5. Salehi-Isfahani, Djavad & Mostafavi-Dehzooei, Mohammad H., 2018. "Cash transfers and labor supply: Evidence from a large-scale program in Iran," Journal of Development Economics, Elsevier, vol. 135(C), pages 349-367.
    6. Zarepour, Zahra & Wagner, Natascha, 2022. "Cash instead of subsidy: Assessing the impact of the iranian energy subsidy reform on households," Energy Policy, Elsevier, vol. 168(C).
    7. Ali Reza Oryoie & Hossein Abbasi-Nejad, 2017. "The Rise and Fall of Top Incomes in Iran 1985-2015," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(4), pages 941-968, Autumn.
    8. World Bank, 2021. "Iran Economic Monitor, Spring 2021," World Bank Publications - Reports 35741, The World Bank Group.
    9. Jun Rentschler & Morgan Bazilian, 2017. "Policy Monitor—Principles for Designing Effective Fossil Fuel Subsidy Reforms," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 138-155.
    10. Atamanov,Aziz & Mostafavi Dehzooei,Mohammadhadi & Wai-Poi,Matthew Grant, 2020. "Welfare and Fiscal Implications from Increased Gasoline Prices in the Islamic Republic of Iran," Policy Research Working Paper Series 9235, The World Bank.
    11. Om Raj Katoch, 2024. "Exploring the relationship between expenditure on power and state finances: an empirical study in Jammu and Kashmir, India," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(10), pages 26397-26413, October.
    12. Ali Enami & Nora Lustig, 2018. "Inflation and the Erosion of the Poverty Reduction Impact of Iran's Universal Cash Transfer," Commitment to Equity (CEQ) Working Paper Series 68, Tulane University, Department of Economics.
    13. Jun Rentschler & Raimund Bleischwitz & Florian Flachenecker, 2018. "On imperfect competition and market distortions: the causes of corporate under-investment in energy and material efficiency," International Economics and Economic Policy, Springer, vol. 15(1), pages 159-183, January.
    14. Auktor, Georgeta Vidican & Loewe, Markus, 2021. "Subsidy reforms in the Middle East and North Africa: Strategic options and their consequences for the social contract," IDOS Discussion Papers 12/2021, German Institute of Development and Sustainability (IDOS).
    15. Georgeta Vidican Auktor & Markus Loewe, 2022. "Subsidy Reform and the Transformation of Social Contracts: The Cases of Egypt, Iran and Morocco," Social Sciences, MDPI, vol. 11(2), pages 1-22, February.
    16. Hizkia H. D. Tasik, 2019. "A Tale of Income and Energy in Rural Areas: What Contributes to People s Happiness? Evidence from Eastern Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 248-255.
    17. Riza Radmehr & Shida Rastegari Henneberry, 2020. "Energy Price Policies and Food Prices: Empirical Evidence from Iran," Energies, MDPI, vol. 13(15), pages 1-15, August.
    18. Moghaddam, Hussein & Wirl, Franz, 2018. "Determinants of oil price subsidies in oil and gas exporting countries," Energy Policy, Elsevier, vol. 122(C), pages 409-420.
    19. World Bank Group, 2016. "Iran Economic Monitor, Fall 2016," World Bank Publications - Reports 25865, The World Bank Group.

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