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Title
World Bank - Water, Electricity,
and the Poor
Who Benefits from Utility Subsidies?
Abstract
Subsidies for utility services are widespread in the water supply, sanitation,
and electricity sectors. One motivation is to improve social welfare of
the poor by facilitating their access to and use of such services, as well as by
redistributing resources to augment their purchasing power. At the same
time, such subsidies have often been seen as engendering resource use
inefficiencies and financially weak utilities, which hobble efforts to expand
and improve service. Those adverse consequences have often been used to
argue against charging consumers less than the cost of service.
The book’s findings are sobering. It concludes that the most common
subsidy instruments (quantity-targeted subsidies such as those delivered
through increasing block tariffs) perform poorly in comparison with most
other transfer mechanisms. Alternative consumption and connection
subsidy mechanisms show more promise, especially when combined with
complementary nonprice approaches to making utility services accessible
and affordable to poor households.
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