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Estimating the impact on poverty of Ghana’s fuel subsidy reform and a mitigating response

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  • Edgar F.A. Cooke
  • Sarah Hague
  • Luca Tiberti
  • John Cockburn
  • Abdel-Rahmen El Lahga

Abstract

The study simulates the welfare implications of the fuel subsidy reform carried out in early 2013 and the required scaling up of cash transfers to mitigate the impact of the subsidy removal on poor households in Ghana. Approximately 78 per cent of fuel subsidies benefited the wealthiest group, with less than 3 per cent reaching the poorest quintiles. We find that the removal of the fuel subsidies, by causing an increase in prices, results in a negative impact on household welfare. The negative effect is worst for the poorest group who experience reduction in their total consumption of 2.1 per cent. The simulation estimates that the poverty rate rises by 1.5 percentage points leading to an additional 395,180 individuals being pushed into poverty.

Suggested Citation

  • Edgar F.A. Cooke & Sarah Hague & Luca Tiberti & John Cockburn & Abdel-Rahmen El Lahga, 2016. "Estimating the impact on poverty of Ghana’s fuel subsidy reform and a mitigating response," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 8(1), pages 105-128, March.
    • Handle: RePEc:taf:jdevef:v:8:y:2016:i:1:p:105-128
    DOI: 10.1080/19439342.2015.1064148
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    1. repec:wbk:wbpubs:13081 is not listed on IDEAS
    2. Arze del Granado, Francisco Javier & Coady, David & Gillingham, Robert, 2012. "The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries," World Development, Elsevier, vol. 40(11), pages 2234-2248.
    3. Maria Vagliasindi, 2013. "Implementing Energy Subsidy Reforms : Evidence from Developing Countries," World Bank Publications - Books, The World Bank Group, number 11965.
    4. Quentin Wodon, 2012. "Improving the Targeting of Social Programs in Ghana," World Bank Publications - Books, The World Bank Group, number 13082.
    5. Mr. David Coady & Mr. Javier Arze del Granado, 2010. "The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries," IMF Working Papers 2010/202, International Monetary Fund.
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    Cited by:

    1. 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.
    2. Ofori, Roland O., 2023. "The economic cost of fuel subsidies in Ghana," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).
    3. Pu, Lei & Wang, Xiuhui & Tan, Zhongfu & Wang, Huaqing & Yang, JiaCheng & Wu, Jing, 2020. "Is China's electricity price cross-subsidy policy reasonable? Comparative analysis of eastern, central, and western regions," Energy Policy, Elsevier, vol. 138(C).
    4. Bhattacharyya, Ranajoy & Ganguly, Amrita, 2017. "Cross subsidy removal in electricity pricing in India," Energy Policy, Elsevier, vol. 100(C), pages 181-190.
    5. Maboshe, Mashekwa & Kabechani, Akabondo & Chelwa, Grieve, 2019. "The welfare effects of unprecedented electricity price hikes in Zambia," Energy Policy, Elsevier, vol. 126(C), pages 108-117.
    6. Stefan Bakker & Gary Haq & Karl Peet & Sudhir Gota & Nikola Medimorec & Alice Yiu & Gail Jennings & John Rogers, 2019. "Low-Carbon Quick Wins: Integrating Short-Term Sustainable Transport Options in Climate Policy in Low-Income Countries," Sustainability, MDPI, vol. 11(16), pages 1-17, August.
    7. Bah, Muhammad Maladoh & Saari, M. Yusof, 2020. "Quantifying the impacts of energy price reform on living expenses in Saudi Arabia," Energy Policy, Elsevier, vol. 139(C).
    8. Meskoub, M., 2015. "Cash transfer as a social policy instrument or a tool of adjustment policy: from indirect subsidies (to energy and utilities) to cash subsidies in Iran, 2010-2014," ISS Working Papers - General Series 610, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    9. Ragchaasuren Galindev & Tsolmon Baatarzorig & Nyambaatar Batbayar & Delgermaa Begz & Unurjargal Davaa & Oyunzul Tserendorj, 2019. "Impact of Fiscal Consolidation on the Mongolian Economy," Working Papers MPIA 2019-20, PEP-MPIA.

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