While there is growing evidence of the impact of targeted subsidies on private input demand, as far as we are aware no empirical studies have examined the spillover effects of targeted subsidies for just one input on the use of other complementary inputs with which there is low substitutability. Consequently, this study begins to fill this gap by exploring the effect of increasing access to subsidized fertilizer on farmers’ use of improved seed in Nigeria.

Energy subsidies are aimed at protecting consumers, however, subsidies aggravate fiscal imbalances, crowd out priority public spending, and depress private investment, including in the energy sector. This book provides the most comprehensive estimates of energy subsidies currently available for 176 countries and an analysis of “how to do” energy subsidy reform, drawing on insights from 22 country case studies undertaken by the IMF staff and analyses carried out by other institutions.

This paper addresses the problems of defining and measuring government subsidies, examines why and how government subsidies are used as a fiscal policy tool, assesses their economic effects, appraises international empirical evidence on government subsidies, and offers options for their reform. Recent international trends in government subsidy expenditure are analyzed for the 16-year period from 1975 to 1990, using general government subsidy data for 60 countries from the System of National Accounts (SNA) and central government expenditure on subsidies and other current transfers for 68 countries from Government Finance Statistics (GFS). The paper reviews major policy options for subsidy reform, focusing on ways to improve the cost-effectiveness of subsidy programs.

This book takes forward our understanding of agricultural input subsidies in low income countries.

As governments resort to industrial policies to achieve economic and non-economic objectives, the number of subsidies implemented each year has more than tripled in the last decade. Using detailed data across a large number of advanced and emerging economies, we empirically investigate the effects of domestic subsidies on international trade flows. Estimates from a difference-in-difference specification show that on average subsidies promote both exports and imports. These effects are partly driven by selection into subsidies, as governments target export-oriented and import-competing products. The results however mask significant differences across countries. Specifically, exports of subsidized products from G20 emerging markets increase 8 percent more than exports of other products, with no evidence of selection. The gravity estimates confirm that subsidies promote international relative to domestic trade. These spillover effects are concentrated in some industries, such as electrical machinery, and are stronger when subsidies are given through tax breaks than other policy instruments. The subsidy-led rise in trade calls for international cooperation to manage risks of retaliatory actions and possible drifts towards a subsidy war.

This study has been conducted in order to generate evidence of the visibility of exit from farm input subsidies in an African context. The study simulates the impact of alternative exit strategies from Malawi’s farm input subsidy program on maize markets. The simulation is conducted using a multiequation partial equilibrium model of the national maize market, which is sequentially linked via a price-linkage equation to local rural maize markets. The model accounts for market imperfections prevailing in the country that arise from government price interventions. Findings show that some alternative exit strategies have negative and sustained impacts on maize yields, production, and acreage allocated to maize over the simulation period. Market prices rise steadily as a result of the implementation of different exit strategies. Despite higher maize prices, domestic maize consumption remains fairly stable, with a slow but increasing trend over the simulation period. Results further suggest that exit strategies that are coupled with improvements in agricultural extension services have the potential to offset the negative impacts of the removal or scaling down of agricultural input subsidies. The study findings demonstrate the difficulty of feasibly removing farm input subsidies. Study recommendations are therefore relevant for policymakers and development partners debating removal or implementation of farm input subsidies.

Identifying policies which can improve water sector management is critically important given the global burden of water-related disease. Each year, 1 in 10 child deaths—roughly 800,000 in total—is the direct result of diarrhea. Can private-sector participation (PSP) in the urban piped water sector improve child health? The author uses child-level data from 39 African countries during 1986–2010 to show that introducing PSP decreases diarrhea among urban dwelling children under five years of age by 5.6 percentage points, or 35 percent of its mean prevalence. PSP also leads to greater reliance on piped water. To attribute causality, the author exploits time variation in the private water market share controlled by African countries’ former colonizers. A placebo analysis reveals that PSP does not affect symptoms of respiratory illness in the same children, nor does it affect a rural control group unaffected by PSP.