Impact of Subsidy Reform with Cash Transfer on the Macro-Economy, Household, and Industry: A Scoping Review
Abstract
As the removal of subsidies carries the risk of economic distortion and public resistance, cash transfers have emerged as a key mitigation strategy against the potential adverse effects of subsidy removal. This study aims to investigate the effectiveness of cash transfers following the removal of subsidies and to identify the conditions necessary for the successful implementation of subsidy reforms. A scoping review was conducted to assess empirical studies on the effectiveness of cash transfers, following the preferred reporting items for systematic reviews and meta-analyses guidelines. The review analyzed impacts on macro-economy, households and industry to determine the overall efficacy of cash transfer reforms. The database includes Web of Science and Scopus. This review reveals that cash transfers can mitigate the adverse effects of subsidy removal. However, they can also trigger inflation. Targeting vulnerable households is more effective in reducing poverty rates and narrowing the poverty gap. The impact on consumption remains inconclusive. Cash transfer reforms also create a ripple effect across industries. This review provides policymakers with a comprehensive understanding of the effectiveness of cash transfers and the complexities involved in their implementation. A robust and accurate database of recipients is essential to ensure that the transfers reach the intended individuals. Additionally, clear and consistent communication, transparency, and accountability are vital for building public understanding, trust, and confidence in subsidy reform. While cash transfer as part of subsidy reform has gained much attention, comprehensive reviews of this topic are limited. This study fills this gap by providing a thorough review of existing research on the impact of cash transfers as a mitigation measure in subsidy reforms. Additionally, it summarizes crucial policy implications and offers suggestions for future research.
Keywords: cash transfer, scoping review, subsidy reform.
Full Text:
PDFReferences
ACHARYA, R. H., & SADATH, A. C. (2017). Implications of energy subsidy reform in India. Energy Policy, 102(December 2016), pp. 453–462. https://doi.org/10.1016/j.enpol.2016.12.036
ADAGUNODO, M. (2013). Petroleum products pricing reform in Nigeria: Welfare analysis from household budget survey. International Journal of Energy Economics and Policy, 3(4), pp. 459–472.
ARKSEY, H., & O’MALLEY, L. (2005). Scoping studies: Towards a methodological framework. International Journal of Social Research Methodology: Theory and Practice, 8(1), pp. 19–32. https://doi.org/10.1080/1364557032000119616
BREISINGER, C., ENGELKE, W., & ECKER, O. (2012). Leveraging fuel subsidy reform for transition in Yemen. Sustainability, 4(11), pp. 2862–2887. https://doi.org/10.3390/su4112862
BREISINGER, C., KASSIM, Y., KURDI, S., RANDRIAMAMONJY, J., & THURLOW, J. (2023). From Food Subsidies to Cash Transfers: Assessing Economy-Wide Benefits and Trade-Offs in Egypt. Journal of African Economies, 33(2), pp. 109–129. https://doi.org/10.1093/jae/ejad006
BREISINGER, C., MUKASHOV, A., RAOUF, M., & WIEBELT, M. (2019). Energy subsidy reform for growth and equity in Egypt: The approach matters. Energy Policy, 129(January), pp. 661–671. https://doi.org/10.1016/j.enpol.2019.02.059
BURKE, P. J., BATSUURI, T., & YUDHISTIRA, M. H. (2017). Easing the traffic: The effects of Indonesia’s fuel subsidy reforms on toll-road travel. Transportation Research Part A: Policy and Practice, 105, pp. 167–180. https://doi.org/10.1016/j.tra.2017.08.003
COADY, D., PARRY, I., SEARS, L., & SHANG, B. (2017). How Large Are Global Fossil Fuel Subsidies? World Development, 91, pp. 11–27. https://doi.org/10.1016/j.worlddev.2016.10.004
COCKBURN, J., ROBICHAUD, V., & TIBERTI, L. (2018). Energy Subsidy Reform and Poverty in Arab Countries: A Comparative CGE-Microsimulation Analysis of Egypt and Jordan. Review of Income and Wealth, 64, pp. S249–S273. https://doi.org/10.1111/roiw.12309
COMMANDER, S. (2012). A Guide to the Political Economy of Reforming Energy Subsidies. IZA Policy Paper No. 52, 52.
COOKE, E. F. A., HAGUE, S., TIBERTI, L., COCKBURN, J., & EL LAHGA, A. R. (2016). Estimating the impact on poverty of Ghana’s fuel subsidy reform and a mitigating response. Journal of Development Effectiveness, 8(1), pp. 105–128. https://doi.org/10.1080/19439342.2015.1064148
COUHARDE, C., & MOUHOUD, S. (2020). Fossil Fuel Subsidies, Income Inequality, and Poverty: Evidence From Developing Countries. Journal of Economic Surveys, 34(5), pp. 981–1006. https://doi.org/10.1111/joes.12384
DENNIS, A. (2016). Household welfare implications of fossil fuel subsidy reforms in developing countries. Energy Policy, 96, pp. 597–606. https://doi.org/10.1016/j.enpol.2016.06.039
FARAJZADEH, Z., & BAKHSHOODEH, M. (2015). Economic and environmental analyses of Iranian energy subsidy reform using Computable General Equilibrium (CGE) model. Energy for Sustainable Development, 27, 147–154. https://doi.org/10.1016/j.esd.2015.06.002
FATHURRAHMAN, F., KAT, B., & SOYTAṢ, U. (2017). Simulating Indonesian fuel subsidy reform: a social accounting matrix analysis. Annals of Operations Research, 255(1–2), pp. 591–615. https://doi.org/10.1007/s10479-015-1954-x
GELAN, A. (2018). Economic and environmental impacts of electricity subsidy reform in Kuwait: A general equilibrium analysis. Energy Policy, 112, pp. 381–398. https://doi.org/10.1016/j.enpol.2017.10.032
GELAN, A. U. (2018). Kuwait’s energy subsidy reduction: Examining economic and CO2 emission effects with or without compensation. Energy Economics, 71, pp. 186–200. https://doi.org/10.1016/j.eneco.2018.02.014
GHARIBNAVAZ, M. R., & WASCHIK, R. (2015). Food and energy subsidy reforms in Iran: A general equilibrium analysis. Journal of Policy Modeling, 37(5), pp. 726–741. https://doi.org/10.1016/j.jpolmod.2015.07.002
GHODDUSI, H., MOROVATI, M., & RAFIZADEH, N. (2022). Dynamics of fuel demand elasticity: Evidence from Iranian subsidy reforms. Energy Economics, 110(February 2021), 106009. https://doi.org/10.1016/j.eneco.2022.106009
GUSENBAUER, M., & HADDAWAY, N. R. (2020). Which academic search systems are suitable for systematic reviews or meta-analyses? Evaluating retrieval qualities of Google Scholar, PubMed, and 26 other resources. Research Synthesis Methods, 11(2), pp. 181–217. https://doi.org/10.1002/jrsm.1378
GUTNER, T. (2002). The political economy of food subsidy reform: The case of Egypt. Food Policy, 27(5–6), pp. 455–476. https://doi.org/10.1016/S0306-9192(02)00049-0
HAMID, K. A., & RASHID, Z. A. (2012). Cambodia’s Electricity Sector in the Context of Regional Electricity Market Integration. in Wu, Y., X. Shi, and F. Kimura (eds.), Energy Market Integration in East Asia: Theories, Electricity Sector and Subsidies, ERIA Research Project Report 2011-17, ERIA, pp.141-172.
HIGGINS, J. P. T., THOMAS, J., CHANDLER, J., CUMPSTON, M., LI, T., PAGE, M. J., & WELCH, V. A. (2019). Cochrane Handbook for Systematic Reviews of Interventions. https://doi.org/10.1002/9781119536604
HOSNI, R., & RAMADAN, R. (2018). Food subsidy or cash transfer: Impact of the food subsidy reform on Egyptian households. New Medit, 17(3), pp. 9–22. https://doi.org/10.30682/nm1803b
KITCHENHAM, B., & CHARTERS, S. (2007). Guidelines for performing systematic literature reviews in software engineering. Technical Report, EBSE Technical Report EBSE-2007-01. https://www.cs.auckland.ac.nz/~norsaremah/2007 Guidelines for performing SLR in SE v2.3.pdf
LABEAGA, J. M., LABANDEIRA, X., & LÓPEZ-OTERO, X. (2020). Energy taxation, subsidy removal and poverty in Mexico. Environment and Development Economics, 26(3), pp. 1–22. https://doi.org/doi:10.1017/S1355770X20000364
LI, Y., SHI, X., & SU, B. (2017). Economic, social and environmental impacts of fuel subsidies: A revisit of Malaysia. Energy Policy, 110(April), pp. 51–61. https://doi.org/10.1016/j.enpol.2017.08.015
LIN, B., & XU, M. (2019). Good subsidies or bad subsidies? Evidence from low-carbon transition in China’s metallurgical industry. Energy Economics, 83, pp. 52–60. https://doi.org/10.1016/j.eneco.2019.06.015
LIU, J. J., SALLEH, N. H. M., YAHOO, M., NOR, N. G. B. M., & AHMAD, R. (2024). Removing Price Subsidies and Impacts on Consumption and Production Patterns : Evidence From a Systematic Literature Review. Journal of Policy Studies, 39(1), pp. 29–40. https://doi.org/https://doi.org/10.52372/jps39103 Articles
LIU, J., SUIB, N. A. M., SALLEH, N. H. M., HASHIM, K., & SHUKOR, M. S. (2024). Effect of Palm Oil Subsidies on Productivity and Well-Being of Independent Smallholders. Jurnal Ekonomi Malaysia, 58(1), pp. 1–15. https://doi.org/http://dx.doi.org/10.17576/JEM-2024-5801-04
LOFGREN, H., & EL-SAID, M. (2001). Food subsidies in Egypt: reform options, distribution and welfare. Food Policy, 26(1), pp. 65–83. https://doi.org/10.1016/S0306-9192(00)00030-0
MARTÍN-MARTÍN, A., ORDUNA-MALEA, E., & LÓPEZ-CÓZAR, E. D. (2018). Google Scholar, Web of Science, and Scopus: a systematic comparison of citations in 252 subject categories. (arXiv:1808.05053v1 [cs.DL]). Journal of Informetrics, 12(4), pp. 1160–1177. http://arxiv.org/abs/1808.05053
MULROW, C. D. (1994). Systematic Reviews: Rationale for systematic reviews. BMJ, 309(2), pp. 597–599. https://doi.org/10.2323/jgam.35.151
MURJANI, A. (2020). Assessing the energy subsidy reform in indonesia through different scenarios. International Journal of Energy Economics and Policy, 10(4), pp. 122–134. https://doi.org/10.32479/ijeep.9223
NARAYANAN G, B., & RUNGTA, V. (2014). Export Subsidy Reforms and Productivity Improvements: The Case of the Indian Textile and Clothing Sector. Margin, 8(3), pp. 327–352. https://doi.org/10.1177/0973801014531132
OKOLI, C. (2015). A guide to conducting a standalone systematic literature review. Communications of the Association for Information Systems, 37(1), pp. 879–910. https://doi.org/10.17705/1cais.03743
PAGE, M. J., MCKENZIE, J. E., BOSSUYT, P. M., BOUTRON, I., HOFFMANN, T. C., MULROW, C. D., SHAMSEER, L., TETZLAFF, J. M., AKL, E. A., BRENNAN, S. E., … MOHER, D. (2021). The PRISMA 2020 statement: An updated guideline for reporting systematic reviews. The BMJ, 372. https://doi.org/10.1136/bmj.n71
PRABOWO, E., HARIANTO, JUANDA, B., & INDRAWAN, D. (2022). The Economic Price of Liquid Petroleum Gas, Poverty and Subsidy Removal Compensation Scenario in Indonesia. International Journal of Energy Economics and Policy, 12(5), pp. 169–177. https://doi.org/10.32479/ijeep.13356
RENTSCHLER, J. (2016). Incidence and impact: The regional variation of poverty effects due to fossil fuel subsidy reform. Energy Policy, 96, pp. 491–503. https://doi.org/10.1016/j.enpol.2016.06.025
ROOS, E. L., & ADAMS, P. D. (2020). The Economy-Wide Impact of Subsidy Reform: A CGE Analysis. World Trade Review, 19(S1), pp. S18–S38. https://doi.org/10.1017/S1474745620000257
SULAIMAN, N., HARUN, M., & YUSUF, A. A. (2022). Impacts of Fuel Subsidy Rationalization on Sectoral Output and Employment in Malaysia. Asian Development Review, 39(01), pp. 315–348. https://doi.org/10.1142/s0116110522500081
TIMILSINA, G. R., & PARGAL, S. (2020). Economics of energy subsidy reforms in Bangladesh. Energy Policy, 142(April), 111539. https://doi.org/10.1016/j.enpol.2020.111539
TIMMER, M. P., DIETZENBACHER, E., LOS, B., STEHRER, R. & DE VRIES, G. J. (2015). An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production. In Review of International Economics (pp. 23: 575–605).
TRICCO, A. C., LILLIE, E., ZARIN, W., O’BRIEN, K. K., COLQUHOUN, H., LEVAC, D., MOHER, D., PETERS, M. D. J., HORSLEY, T., WEEKS, L., … STRAUS, S. E. (2018). PRISMA extension for scoping reviews (PRISMA-ScR): Checklist and explanation. Annals of Internal Medicine, 169(7), pp. 467–473. https://doi.org/10.7326/M18-0850
WANG, X., XU, M., LIN, B., BODIRSKY, B. L., XUAN, J., DIETRICH, J. P., STEVANOVIĆ, M., BAI, Z., MA, L., JIN, S., FAN, S., LOTZE-CAMPEN, H., & POPP, A. (2022). Reforming China’s fertilizer policies: implications for nitrogen pollution reduction and food security. Sustainability Science, 18, pp. 407-420. https://doi.org/10.1007/s11625-022-01189-w
WETZSTEIN, M. E. (2013). Microeconomic Theory Concepts and Connections Second Edition. Routledge.
YING, L. S., & HARUN, M. (2019a). Fuel subsidy abolition and performance of the sectors in Malaysia: A computable general equilibrium approach. Malaysian Journal of Economic Studies, 56(2), pp. 303-326. https://doi.org/10.22452/MJES.vol56no2.7
YING, L. S., & HARUN, M. (2019b). Responses of firms and households to government expenditure in Malaysia: Evidence for the fuel subsidy withdrawal. Jurnal Ekonomi Malaysia, 53(2), pp. 29–39. https://doi.org/10.17576/JEM-2019-5302-3
ZAREPOUR, Z., & WAGNER, N. (2022). Cash instead of subsidy: Assessing the impact of the iranian energy subsidy reform on households. Energy Policy, 168, 113145. https://doi.org/10.1016/j.enpol.2022.113145
Refbacks
- There are currently no refbacks.