A Comparative Analysis of Subsidies and Subsidy Reforms in the Middle East and North Africa Region

The paper compares the distribution of energy and food subsidies across households and the impact of subsidies reforms on household welfare in the MENA region using a unified model and harmonized household data. Results show that the distribution of subsidies and the welfare effects of subsidies reforms are quite diverse across countries and products. Energy subsidies tend to be pro-rich in terms of absolute amounts but tend to be more important for the poor in terms of expenditure shares. Instead, food subsidies are larger for the poor in absolute and relative terms. These findings do not apply everywhere, and the scale of these phenomena are different across countries and products. The welfare effect of a 30 percent reduction in subsidies can be important, especially if we consider the cumulated effect across products, but the cost of compensating the loss in welfare for the poor is generally low as compared to the budget benefits of decreasing subsidies.