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Counter-intuitive effects of fuel subsidies in Madagascar

Graham Watson

14th September 2019

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The World Bank looks at how the Malagasy government has spent a significant amount subsidising fuel.

This excellent World Bank clip looks at the effects of this, and concludes that such an intervention is most beneficial for the rich who consume the most electricity - often from fuel-powered generators, the most fuel for transportation and processed food, another good that is energy-intensive.

As a result, the World Bank is seeking to reduce the government's involvement in the market for fuel and promote efficient market outcomes. A lovely example of why government intervention can have counter-intuitive effect.

Counter-intuitive effects of fuel subsidies in Madagascar
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Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to Tutor2U, reads voraciously and is interested in all aspects of Teaching and Learning.

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