Publication: Energy Subsidies Reform in Jordan: Welfare Implications of Different Scenarios
Facing a fiscal crisis, Jordan initiated substantial petroleum subsidy reforms in 2012. The government has also long contemplated how to cut electricity subsidies, which surpass the fiscal burdens imposed by the petroleum subsidies. This paper estimates the impacts of the 2012 petroleum subsidies reform on household welfare and government revenues. It also simulates the distributional and fiscal impacts from ending subsidies in the electricity sector, where the pricing structure is more complex than petroleum prices. The paper looks at the direct and indirect impacts of reform. Moreover, the paper discusses the political economy considerations of reform. While the full removal of petroleum subsidies would have increased poverty, the compensatory cash transfer program the government instituted is estimated to have fully offset the negative impact for the poorer population. The impact of reforms in the electricity sector will depend significantly on the implementation method chosen. A flat increase of tariffs toward cost recovery will put a huge burden on the poorest households. However, a progressive increase in tariffs will generate substantial savings for the government, even with compensatory mechanisms to mitigate the strong negative impact on the vulnerable population. The immediate compensation of the losers from reform appears to be a crucial factor in the successful implementation of reforms in Jordan.
“Atamanov, Aziz; Jellema, Jon; Serajuddin, Umar. 2015. Energy Subsidies Reform in Jordan : Welfare Implications of Different Scenarios. Policy Research Working Paper;No. 7313. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/22189 License: CC BY 3.0 IGO.”
Other publications in this report series
PublicationTaxation and Capital Structure : Evidence from a Transition Economy(World Bank, Washington, DC, 2008-10)The authors examine the effects of taxation on financing policy using the corporate tax reform in 2001 in Croatia as a natural experiment. Since the extant literature on tax effects on capital structure studies listed firms in developed countries, it is worth investigating whether the same results apply to privately-held, small and medium size firms in transition economies. The findings provide significant evidence that lower taxes have affected the capital structure of Croatian firms, resulting in increased equity levels and decreased long-term debt levels. The authors also find that smaller and more profitable firms were more likely to reduce their debt levels. These findings are consistent with the trade-off theory of capital structure, which suggests that lower taxes decrease the incentive to hold debt due to decreasing interest tax deductibility.
PublicationThe Market for Retirement Products in Australia(World Bank, Washington, DC, 2008-10)Australia introduced a mandatory retirement savings scheme in 1992. This built on pre-existing voluntary occupational plans. The new scheme has been very successful in expanding coverage and mobilizing large financial savings that are equal to close to 100 percent of GDP. However, Australia does not impose restrictions on payout options. The payout phase used to be dominated by lump sum withdrawals, which accounted for 80 percent of benefit payments as recently as 2002. But pension payments increased in recent years and now represent 45 percent of total payments. The vast majority of these pension payments take the form of term annuities and allocated annuities. The latter are similar to phased withdrawals in Chile but run for fixed terms of up to 25 years rather than for lifetime terms. The demand for life annuities and lifetime phased withdrawals is very limited. The paper discusses the factors that have shaped the pattern of demand for retirement products, including the availability of the universal age pension and the effect of clawback provisions, the impact of the high level of home ownership, and the widespread preference of retiring workers for reliance on self-annuitization. The paper also reviews the prudential regulation of superannuation funds and life insurance companies.
PublicationThe Market for Retirement Products in Sweden(World Bank, Washington, DC, 2008-10)Far-reaching changes in the regulation of financial markets and the organization of public pensions in the 1980s and 1990s transformed the landscape for retirement products in Sweden. First, banking and insurance were extensively deregulated in the 1980s, while the securities markets experienced major expansion. Insurance received a large boost from the authorization of unit-linked products in the early 1990s. Second, the public pension system was reformed. Survivor benefits for widows were eliminated from the public pillar in the late 1980s, leading to a large increase in demand for term life insurance. The old defined benefit public pension system was replaced by a notional or nonfinancial defined contribution (NDC) scheme, while a funded defined contribution (FDC) component was also created in the public pillar. The four occupational pension funds that cover the majority of Swedish workers were also converted into FDC schemes. This paper reviews the implications of these changes for the Swedish annuity market. It discusses the regulation of payout options in Sweden, highlighting the compulsory use of life annuities in the public pillar and the preference for term annuities in the occupational funds. It examines the performance of providers of retirement products, including the PPM, and reviews the increasing focus on risk-based regulation and supervision. The paper also emphasizes Sweden's success in moving in the direction of increased funding and privatization of old age insurance, while maintaining its basic character as a highly developed welfare state.
PublicationExport Surges : The Power of a Competitive Currency(World Bank, Washington, DC, 2008-10)How can countries stimulate and sustain strong export growth? To answer this question, the authors examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least seven years. They find that export surges in developing countries tend to be preceded by a large real depreciation-which leaves the exchange rate significantly undervalued-and a reduction in exchange rate volatility. In contrast, in developed countries, the role of the exchange rate is less pronounced. The authors examine why the exchange rate is so important in developing countries and find that the depreciation leads to a significant reallocation of resources in the export sector. In particular, depreciation generates more entries into new export products and new markets, and the percentage of new entries that fail after one year declines. These new products and new markets are important, accounting for 25 percent of export growth during the surge in developing countries. The authors argue that maintaining a competitive currency leads firms to expand the product and market space for exports, inducing a large reorientation of the tradable sector.
PublicationPolitical Alternation as a Restraint on Investing in Influence : Evidence from the Post-Communist Transition(World Bank, Washington, DC, 2008-10)The authors develop and implement a method for measuring the frequency of changes in power among distinct leaders and ideologically distinct parties that is comparable across political systems. The authors find that more frequent alternation in power is associated with the emergence of better governance in post communist countries. The results are consistent with the hypothesis that firms seek durable protection from the state, which implies that expected political alternation is relevant to the decision whether to invest in influence with the governing party or, alternatively, to demand institutions that apply predictable rules, with equality of treatment, regardless of the party in power.