In December 2010, Iran introduced an ambitious energy subsidy reform that combined large price increases for fuel with generous cash transfers. This column explains the key lesson: that despite severe flaws in the programme’s implementation, it is possible to reduce the distortions caused by cheap energy and offer citizens a minimum basic income that is not excessively harmful to work incentives.
Energy subsidy reforms that do not include some form of income maintenance as compensation for the poor often spark social unrest.
Because of mismanagement in the implementation, Iran’s energy price reform has lost credibility – but this is a mistake.By […]
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