Reducing energy subsidies in China, India and Russia : dilemmas for decision makers

This article examines and compares efforts to reduce energy subsidies in China, India and Russia. Despite dissimilarities in forms of governance, these three states have followed surprisingly similar patterns in reducing energy subsidies, characterised by two steps forward, one step back. Non-democratic governments and energy importers might be expected to be more likely to halt subsidies. In fact, the degree of democracy and status as net energy exporters or importers does not seem to significantly affect these countries’ capacity to reduce subsidies, as far as can be judged from the data in this article. Politicians in all three fear that taking unpopular decisions may provoke social unrest.Publisher PDFPeer reviewe

Rebate Subsidies, Matching Subsidies and Isolation Effects

In a series of recent experiments (Davis, Millner and Reilly, 2005, Eckel and Grossman, 2003, 2005a-c, 2006), matching subsidies generate significantly higher charity receipts than do theoretically equivalent rebate subsidies. This paper reports a laboratory experiment conducted to examine whether the higher receipts are attributable to a relative preference for matching subsidies or to an ‘isolation effect’ (McCaffery and Baron, 2003, 2006). Some potential policy implications of isolation effects on charitable contributions are also considered.experiments, charitable contributions, methodology

Subsidies to Industry and the Environment

Governments support particular firms or sectors by granting low interest financing, reduced regulation, tax relief, price supports, monopoly rights, and a variety of other subsidies. Previous work in partial equilibrium shows that subsidies to environmentally sensitive industries increases output and pollution emissions. We examine the environmental effects of subsidies in general equilibrium. Since all resources are used, whether or not subsidies increase emissions depends on the relative emissions intensity and incentives to emit of the subsidized industry versus the emissions intensity and the incentives to emit of the industry which would otherwise use the resources. Since subsidies must move resources to a less productive use, the economy wide marginal product of emissions falls with an increase in any subsidy, tending to decrease emissions. On the other hand, subsidies tend to move resources to more emissions intensive industries. Thus, subsidies increase pollution emissions if resources are moved to an industry for which emissions intensity is high enough to overcome the reduction in emissions caused by lower overall marginal product of emissions. We show that, under general conditions, subsidies also increase the interest rate, thus causing the economy to over-accumulate capital. Steady state emissions then rise, even if emissions fall in the short run. We also derive an optimal second best environmental policy given industrial subsidies. The results indicate that, under reasonable conditions, subsidies raise the opportunity cost of environmental quality in the long run. Finally, we examine the relationship between growth and the environment with subsidies. Under more restrictive conditions, reducing some subsidies may offer a path to sustainable development by raising income and at the same time improving the environment.Subsidies, pork, price supports, output subsidies, input subsidies, pollution, emissions.

The Government’s financial support for fossil fuel companies is being overlooked

Bob Ward explores the subsidies currently doled out by the government to fossil fuel companies and asks why it has not attracted the same degree of criticism as subsidies for the renewable energy industry

The Role of the Basic Health Program in the Coverage Continuum: Opportunities, Risks and Considerations for States

Outlines issues for offering subsidized coverage to those eligible for insurance exchange subsidies by using federal dollars that would otherwise go to those subsidies, including continuity of coverage, impact on exchanges, and financial feasibility

Subsidies for Intracity and Intercity Commuting

This paper analyzes subsidies for intracity and intercity commuting in an urban economics framework with two cities and agglomeration externalities, where workers may commute within and between cities. First, commuting subsidies serve to internalize agglomeration externalities: Intracity commuting subsidies give incentives to move to the larger city and intercity commuting subsidies make residents of the periphery commute to the core. Second, if agglomeration rents are locally captured, commuting subsidies act as a welfare enhancing transfer from the core to the periphery.commuting subsidies, agglomeration externalities, intercity and intracity commuting

Optimal Taxation of Risky Human Capital

In a model with ex-ante homogenous households, earnings risk and a general earnings function, we derive the optimal linear labor tax rate and optimal linear education subsidies. The optimal income tax trades off social insurance against incentives to work and to invest in human capital. Education subsidies are not used for social insurance, but are only targeted at off-setting the distortions of the labor tax and internalizing a fiscal externality. Both optimal education subsidies and tax rates increase if labor and education are more complementary, since education subsidies indirectly lower labor tax distortions by stimulating labor supply. Optimal education subsidies (taxes) also correct non-tax distortions arising from missing insurance markets. Education subsidies internalize a positive (negative) fiscal externality if there is underinvestment (overinvestment) in education due to risk. Education policy unambiguously allows for more social insurance if education is a risky activity. However, if education hedges against labor market risk, optimal tax rates could be lower than without education subsidies.labor taxation, human capital investment, education subsidies, idiosyncratic risk, risk properties of human capital

Hidden Subsidies

Many governments use price subsidisation (total costs less total revenues from user charges) to meet social protection objectives in lieu of, or in addition to, direct income transfers. Such subsidies may be perceived as influencing behaviour to further other socially desirable policies. For example, the price response induced by lowering the price of schooling will both lower the cost of living for the beneficiaries and also increase the investment in education more than a similar income transfer would achieve. The incidences of benefits from a general price subsidy are proportional to purchases and can be deduced from the pattern of expenditures. Some goods are inappropriate vehicles for redistribution since subsidies on them will not only accrue mainly to the rich they will actually increase inequality in welfare. It is therefore important to ensure that commodities chosen for price subsidisation are largely consumed by the lower income groups. Also, detailed data on such commodities should be made public to make the extent of subsidy easily tractable. In the case of Pakistan, the problem of lack of transparency of federal and provincial budgets is vividly demonstrated by the inability of such budgets to readily highlight the subsidy on the various economic and social services, which are essentially in the nature of ‘private’ goods, provided by such governments. This is not only a reflection of the problem of the nature of budgeting practices whereby, first, revenues and expenditures on different heads are shown separately and no account is made either of depreciation of assets or the costs of capital used to finance the acquisition of assets which yield a stream of services. Second, to the extent that the subsidies largely benefit the upper income groups, political compulsions dictate that such subsidies largely remain hidden.

How Much Does the Federal Government Spend to Promote Economic Mobility and for Whom?

Tracks and projects federal expenditures and tax subsidies aimed at enhancing economic mobility, such as employer-related work subsidies, homeownership, savings and investment incentives, and education and training, and who benefits from them

The EU’s Export Refunds on Processed Foods: Legitimate in the WTO?

Export subsidies on processed foods are an important trade policy instrument for the European Union. GATT Article XVI legitimised the use of export subsidies on primary agricultural products, under certain circumstances, but forbade the use of export subsidies on non-primary products. However it was never satisfactorily resolved whether export subsidies could be paid on the primary agricultural products incorporated into processed products, such as pasta. The Uruguay Round Agreements, and particularly the Agreement on Agriculture (the URAA), apparently legitimised the EU’s practice of paying export subsidies on incorporated agricultural products, at least while the Peace Clause was in force. With the demise of the Peace Clause the question arises whether GATT Article XVI has any residual force, given that the range of primary agricultural products exempted by Article XVI from the ban on export subsidies is narrower than the list of agricultural products covered by the URAA.International Relations/Trade,