Although it is widely considered to be an ineffective policy, a number of developing countries offer universal fuel subsidies. However, the prolonged implementation of fuel subsidies creates a misallocation of resources as a subsidy targets the fuel rather than the consumer. Consequently, fuel subsidies benefit the affluent more than the poor. A number of countries implement fuel subsidies, including Algeria, the People’s Republic of China, Ecuador, Egypt, Indonesia Iran, Iraq, Malaysia, Nigeria, Russia, Saudi Arabia, Thailand, and Venezuela. Granado et al (2010) reported that in countries that have subsidized fuel, on average, the top income quintile consumed about six times more subsidized fuel than the bottom quintile. [Read more]
About Rimawan PradiptyoRimawan Pradiptyo is a senior lecturer in economics at the Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia. He earned his Ph.D in economics from the University of York, UK. His research interests are in Behavioural Economics, Applied Game Theory, Environmental Economics, Law and Economics, and Economic Evaluation.
By Rimawan Pradiptyo. Posted October 30, 2012
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