When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform
In 2011 the Government of El Salvador implemented a reform to the gas subsidy that increased the welfare of households in all but the top two deciles of the income distribution. However, the reform turned out to be rather unpopular, especially amon...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/05/24488416/winners-feel-like-losers-evidence-energy-subsidy-reform http://hdl.handle.net/10986/21998 |
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okr-10986-219982021-04-23T14:04:06Z When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform Calvo-Gonzalez, Oscar Cunha, Barbara Trezzi, Riccardo POLITICAL ECONOMY OF REFORM POINT OF SALE CONSUMPTION RETAIL PRICE E-MAIL OPPORTUNITY COST PUBLIC OPINION RESULTS REFORM LPG SUBSIDY INCOME VALUE EXPECTATIONS ELECTRICITY INVESTIGATION MACROECONOMICS INTERNATIONAL ORGANIZATIONS INFORMATION EXCLUSION POLITICAL ECONOMY CONSUMERS WELFARE BARCODE URL ENERGY SUBSIDY VARIABLES ENERGY SUBSIDIES ADEQUATE INFORMATION SYSTEM SUBSIDY SAN PRICE TAX PAYMENTS LEVY MEDIA REVIEW OPEN ACCESS RESULT CHOICE GDP CREATIVE SOLUTIONS MARKET SHARE BUSINESS VOTERS BANDWIDTH TRUSTS INSTITUTION CRITERIA TAX REFORM WEB LINKS PERFECT INFORMATION RESEARCH CARBON TAX SOCIAL ISSUES OUTCOMES INFORMATION PROCESSING E-MAIL ADDRESS PRICE SUBSIDY SUBSIDIES PRICES USES HTML ECONOMIC RESEARCH MARKET PRICE INCOME GROUPS DEVELOPMENT POLICY In 2011 the Government of El Salvador implemented a reform to the gas subsidy that increased the welfare of households in all but the top two deciles of the income distribution. However, the reform turned out to be rather unpopular, especially among winners. This paper relies on ad hoc household surveys conducted before the implementation and in the following two and a half years to test which factors help explain the puzzle. The analysis uses probit and logit models to show that misinformation (a negativity bias by which people with limited information inferred negative consequences), mistrust of the government’s ability to implement the policy, and political priors explain most of the (un)satisfaction before implementation. Perceptions improved gradually—and significantly so—over time when the subsidy reception induced households to update their initial priors, although political biases remained significant throughout the entire period. The results suggest several implications with respect to policy reforms in cases where agents have limited information. 2015-06-02T19:15:45Z 2015-06-02T19:15:45Z 2015-05 Working Paper http://documents.worldbank.org/curated/en/2015/05/24488416/winners-feel-like-losers-evidence-energy-subsidy-reform http://hdl.handle.net/10986/21998 English en_US Policy Research Working Paper;No. 7265 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean El Salvador |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
POLITICAL ECONOMY OF REFORM POINT OF SALE CONSUMPTION RETAIL PRICE OPPORTUNITY COST PUBLIC OPINION RESULTS REFORM LPG SUBSIDY INCOME VALUE EXPECTATIONS ELECTRICITY INVESTIGATION MACROECONOMICS INTERNATIONAL ORGANIZATIONS INFORMATION EXCLUSION POLITICAL ECONOMY CONSUMERS WELFARE BARCODE URL ENERGY SUBSIDY VARIABLES ENERGY SUBSIDIES ADEQUATE INFORMATION SYSTEM SUBSIDY SAN PRICE TAX PAYMENTS LEVY MEDIA REVIEW OPEN ACCESS RESULT CHOICE GDP CREATIVE SOLUTIONS MARKET SHARE BUSINESS VOTERS BANDWIDTH TRUSTS INSTITUTION CRITERIA TAX REFORM WEB LINKS PERFECT INFORMATION RESEARCH CARBON TAX SOCIAL ISSUES OUTCOMES INFORMATION PROCESSING E-MAIL ADDRESS PRICE SUBSIDY SUBSIDIES PRICES USES HTML ECONOMIC RESEARCH MARKET PRICE INCOME GROUPS DEVELOPMENT POLICY |
| spellingShingle |
POLITICAL ECONOMY OF REFORM POINT OF SALE CONSUMPTION RETAIL PRICE OPPORTUNITY COST PUBLIC OPINION RESULTS REFORM LPG SUBSIDY INCOME VALUE EXPECTATIONS ELECTRICITY INVESTIGATION MACROECONOMICS INTERNATIONAL ORGANIZATIONS INFORMATION EXCLUSION POLITICAL ECONOMY CONSUMERS WELFARE BARCODE URL ENERGY SUBSIDY VARIABLES ENERGY SUBSIDIES ADEQUATE INFORMATION SYSTEM SUBSIDY SAN PRICE TAX PAYMENTS LEVY MEDIA REVIEW OPEN ACCESS RESULT CHOICE GDP CREATIVE SOLUTIONS MARKET SHARE BUSINESS VOTERS BANDWIDTH TRUSTS INSTITUTION CRITERIA TAX REFORM WEB LINKS PERFECT INFORMATION RESEARCH CARBON TAX SOCIAL ISSUES OUTCOMES INFORMATION PROCESSING E-MAIL ADDRESS PRICE SUBSIDY SUBSIDIES PRICES USES HTML ECONOMIC RESEARCH MARKET PRICE INCOME GROUPS DEVELOPMENT POLICY Calvo-Gonzalez, Oscar Cunha, Barbara Trezzi, Riccardo When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform |
| geographic_facet |
Latin America & Caribbean El Salvador |
| relation |
Policy Research Working Paper;No. 7265 |
| description |
In 2011 the Government of El Salvador
implemented a reform to the gas subsidy that increased the
welfare of households in all but the top two deciles of the
income distribution. However, the reform turned out to be
rather unpopular, especially among winners. This paper
relies on ad hoc household surveys conducted before the
implementation and in the following two and a half years to
test which factors help explain the puzzle. The analysis
uses probit and logit models to show that misinformation (a
negativity bias by which people with limited information
inferred negative consequences), mistrust of the
government’s ability to implement the policy, and political
priors explain most of the (un)satisfaction before
implementation. Perceptions improved gradually—and
significantly so—over time when the subsidy reception
induced households to update their initial priors, although
political biases remained significant throughout the entire
period. The results suggest several implications with
respect to policy reforms in cases where agents have limited information. |
| format |
Working Paper |
| author |
Calvo-Gonzalez, Oscar Cunha, Barbara Trezzi, Riccardo |
| author_facet |
Calvo-Gonzalez, Oscar Cunha, Barbara Trezzi, Riccardo |
| author_sort |
Calvo-Gonzalez, Oscar |
| title |
When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform |
| title_short |
When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform |
| title_full |
When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform |
| title_fullStr |
When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform |
| title_full_unstemmed |
When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform |
| title_sort |
when winners feel like losers : evidence from an energy subsidy reform |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://documents.worldbank.org/curated/en/2015/05/24488416/winners-feel-like-losers-evidence-energy-subsidy-reform http://hdl.handle.net/10986/21998 |
| _version_ |
1764449870340423680 |