Political Economy Aspects of Fuel Subsidies : A Conceptual Framework

While notoriously inefficient, fuel subsidies are widespread, and in many cases politically stable. This paper discusses and models various political economy aspects of fuel subsidies, focusing on gasoline and kerosene. Both economic and political are considered to explain differences in subsidies, with particular focus on democratic and autocratic governments. A political process is modeled whereby a promise of low fuel prices is used in democracies to attract voters, and in autocracies to mobilize support among key groups. Subsidies to fuels are viewed as either easier to observe, easier to commit to, easier to deliver, or better targeted at core groups, than other public goods or favors offered by rulers. Easier commitment and delivery than for regular public goods can explain the high prevalence of such policies in autocracies, and also in young democracies where the capacity to commit to or deliver complex public goods is not yet fully developed. The analysis provides a framework for empirical testing and verification.

Bibliographic Details

Main Author:	Strand, Jon
Language:	English en_US
Published:	World Bank, Washington, DC 2013-03
Subjects:	APPROACH, AUTOMOBILE, BALANCE, BUYING POWER, CAR, CAR OWNERS, CAR OWNERSHIP, CAR-OWNING HOUSEHOLDS, CARS, COMPARATIVE ECONOMICS, CONCENTRATIONS, CONGESTION, CONGESTION PROBLEMS, DEBT, DECISION MAKING, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DIESEL, DRIVERS, DRIVING, ECONOMIC ANALYSIS, ECONOMIC GROWTH, ECONOMIC GROWTH RATES, ECONOMIC POLICIES, ELASTICITY, ELECTRIC POWER, ENDOGENOUS VARIABLES, ENERGY STRATEGY, ENVIRONMENTAL TAXATION, EXPECTED UTILITY, EXTERNALITIES, EXTERNALITY, FORECASTS, FOSSIL, FOSSIL FUEL, FUEL, FUEL CONSUMPTION, FUEL DEMAND, FUEL PRICE, FUEL PRICES, FUEL SUBSIDIES, FUEL TAX RATES, FUEL TAXATION, FUEL TAXES, FUEL TYPES, FUELS, FUTURE RESEARCH, GAS, GAS PRICE, GAS PRICES, GASOLINE, GASOLINE CONSUMPTION, GASOLINE DEMAND, GASOLINE PRICE, GASOLINE PRICES, GASOLINE TAX, HIGHWAYS, INCOME, INCOME DISTRIBUTION, INCOME GROUPS, INCOME LEVELS, INEFFICIENCY, INTERNATIONAL FUEL TAX, KEROSENE, KEROSENE SUBSIDIES, MACROECONOMICS, MOBILITY, MOTOR FUEL, MOTOR FUEL TAX, MOTOR FUELS, MOTOR VEHICLE, MOTOR VEHICLE OWNERS, MOTOR VEHICLE OWNERSHIP, MOTOR VEHICLE USE, MOTOR VEHICLES, NEGATIVE EXTERNALITIES, OIL, OIL PRICES, PASSENGER CARS, POLITICAL ECONOMY, POLITICAL POWER, POLLUTION, PRICE OF FUELS, PRICE OF GASOLINE, PRIVATE GOODS, PUBLIC, PUBLIC ECONOMICS, PUBLIC FINANCE, PUBLIC GOOD, PUBLIC GOODS, PUBLIC TRANSPORT, PUBLIC TRANSPORTATION, PURCHASES, PURCHASING POWER, ROAD, ROAD USE, TAX, TAX ASSESSMENT, TAX REVENUE, TOTALITARIAN REGIMES, TOTALITARIANISM, TRANSPORT ECONOMICS, TRANSPORT RESEARCH, TRANSPORTATION COST, TRANSPORTATION RESEARCH, TRANSPORTATION SYSTEM, TRAVEL DEMAND, TRAVEL DEMAND PREDICTIONS, TRUE, URBAN AREAS, UTILITY FUNCTION, UTILITY FUNCTIONS, VEHICLE OWNERS, VOTER PREFERENCES, VOTERS,
Online Access:	http://documents.worldbank.org/curated/en/2013/03/17492714/political-economy-aspects-fuel-subsidies-conceptual-framework-political-economy-aspects-fuel-subsidies-conceptual-framework https://hdl.handle.net/10986/13190
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