When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform

In 2011 the Government of El Salvador implemented a reform to the liquefied gas (LPG) 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, including among winners. This paper relies on ad ho...

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Main Authors:	Calvo-Gonzalez, Oscar, Cunha, Barbara, Trezzi, Riccardo
Format:	Journal Article
Published:	Published by Oxford University Press on behalf of the World Bank 2018
Subjects:	TAXATION SUBSIDIES ENERGY SUBSIDY REFORM LIQUIFIED PETROELUM GAS LPG ENVIRONMENTAL PROTECTION POLITICAL ECONOMY CONSUMER PROTECTION STAKEHOLDER INTERESTS STAKEHOLDER ENGAGEMENT
Online Access:	http://hdl.handle.net/10986/30955

id	okr-10986-30955
recordtype	oai_dc
spelling	okr-10986-309552021-05-25T10:54:35Z When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform Calvo-Gonzalez, Oscar Cunha, Barbara Trezzi, Riccardo TAXATION SUBSIDIES ENERGY SUBSIDY REFORM LIQUIFIED PETROELUM GAS LPG ENVIRONMENTAL PROTECTION POLITICAL ECONOMY CONSUMER PROTECTION STAKEHOLDER INTERESTS STAKEHOLDER ENGAGEMENT In 2011 the Government of El Salvador implemented a reform to the liquefied gas (LPG) 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, including 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 regressions 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. 2018-12-06T17:25:34Z 2018-12-06T17:25:34Z 2017-06-01 Journal Article World Bank Economic Review 1564-698X http://hdl.handle.net/10986/30955 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Published by Oxford University Press on behalf of the World Bank Publications & Research :: Journal Article Publications & Research 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
topic	TAXATION SUBSIDIES ENERGY SUBSIDY REFORM LIQUIFIED PETROELUM GAS LPG ENVIRONMENTAL PROTECTION POLITICAL ECONOMY CONSUMER PROTECTION STAKEHOLDER INTERESTS STAKEHOLDER ENGAGEMENT
spellingShingle	TAXATION SUBSIDIES ENERGY SUBSIDY REFORM LIQUIFIED PETROELUM GAS LPG ENVIRONMENTAL PROTECTION POLITICAL ECONOMY CONSUMER PROTECTION STAKEHOLDER INTERESTS STAKEHOLDER ENGAGEMENT 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
description	In 2011 the Government of El Salvador implemented a reform to the liquefied gas (LPG) 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, including 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 regressions 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	Journal Article
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	Published by Oxford University Press on behalf of the World Bank
publishDate	2018
url	http://hdl.handle.net/10986/30955
_version_	1764473263187034112

When Winners Feel Like Losers : Evidence from an Energy Subsidy Reform

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