Publication: Behavioral Solutions for Successful Subsidy Reform: Research Note
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2024-07-30
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2024-07-30
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Governments need sustainable funding to operate effectively, uphold their social contract with citizens, and provide public goods to foster citizens’ well-being and development. When tailored effectively, subsidies for energy, food, and other goods can have beneficial effects, such as promoting positive behaviors by citizens or supporting strategic policy shifts, like pivots to green technologies. On the other hand, subsidies often are costly and inefficient. As a result, they can have net-negative social, environmental, and economic effects, and undermine broader governmental objectives. This policy note, a practical guide for policymakers and practitioners charged with subsidy reform, analyzes why reforming net-harmful subsidy schemes faces steep resistance among the general public and explores solutions to these challenges. The note draws on research and relevant case studies to distill factors associated with the success or failure of reform efforts. Drawing on this evidence and the World Bank’s Energy Sector Reform Assessment Framework (ESRAF), the authors apply a behavioral lens to identify barriers to public support of subsidy reform and potential levers to overcome resistance. Finally, they synthesize key lessons from existing behavioral evidence to propose a set of practical solutions policymakers can adopt to implement subsidy reforms with stronger public support while upholding societal and political legitimacy.
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“World Bank. 2024. Behavioral Solutions for Successful Subsidy Reform: Research Note. © World Bank. http://hdl.handle.net/10986/41973 License: CC BY-NC 3.0 IGO.”
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