The long-run macroeconomic impacts of fuel subsidies in an oil-importing developing country

Plante, Michael (2011): The long-run macroeconomic impacts of fuel subsidies in an oil-importing developing country.

Abstract

Analytical and numerical results show how the presence of a subsidy on household and firm purchases of oil products distorts long-run macroeconomic aggregates in an oil-importing developing country. Beyond leading to over-consumption of oil products these subsidies also lead to increased labor supply, a distorted emphasis on producing traded goods, and higher real wages. The subsidy also impacts the relative price of non-traded goods, causing it to fall when the non-traded sector is more oil-intensive than the traded sector and vice-versa.

• Item Type: MPRA Paper
• Language: English
• Keywords: oil, fuel-price subsidies, developing countries, fiscal policy
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O23 - Fiscal and Monetary Policy in Development; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

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