Subsidy Reform in the Middle East: The Untold Story

The standard political economy explanation for the persistence of energy subsidies in the Middle East has emphasised governments’ fear of political unrest as the main obstacle to reform. This paper sheds a new light on the issue by analysing how unintended beneficiaries, such as the military, traders, and crony businessmen have reaped major benefits from the subsidy system and, in turn, vested their interests in the continuation of the status quo. Using a novel dataset on crony entrepreneurs and military enterprises in Egypt and Tunisia, the paper employs a mix of qualitative and quantitative methods to show how regime insiders have captured a major social safety mechanism in the Middle East and undermined the establishment of a fairer and more efficient system of social protection.

By: Ferdinand Eibl

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