Ukraine Gas Pricing Policy: Distributional Consequences of Tariff Increases

Author/Editor:

Pritha Mitra ; Ruben V Atoyan

Publication Date:

October 15, 2012

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Ukraine’s gas pricing policy subsidizes gas and heating for all households. As the cost of imported gas rises, this policy increasingly weighs on government finances, sustains energy over-consumption, dampens investment in delivery systems, and undermines incentives for domestic production. However, gas price hikes have been deferred to the medium-term as they are politically unpopular. Through estimation of household demand functions by income quintiles to evaluate the distributional consequences of tarrif reform, this paper finds that tariff reforms combined with targeted social support can address the economic inefficiencies of the current pricing policy without large welfare costs to the lower income segments of the population.

Series:

Working Paper No. 2012/247

Subject:

Consumption Expenditure Income National accounts Price elasticity Prices Tariffs Taxes

English

Publication Date:

October 15, 2012

ISBN/ISSN:

9781475512878/1018-5941

Stock No:

WPIEA2012247

Pages:

23

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