Welfare, poverty and income distribution
Hamed Ahmadi; Mohammad Reza Behboudi
Abstract
The Targeted Subsidies Policy (TSP) was implemented as one of the biggest economic reforms in Iran in 2009. However, after more than a decade, it did not achieve all its predetermined goals. Regardless of its positive effects, this research aims to identify and determine the adverse effects of this plan ...
Read More
The Targeted Subsidies Policy (TSP) was implemented as one of the biggest economic reforms in Iran in 2009. However, after more than a decade, it did not achieve all its predetermined goals. Regardless of its positive effects, this research aims to identify and determine the adverse effects of this plan after its implementation, which led to the inefficiency of TSP. This research is based on Sandelowski & Barroso Meta-Synthesis method in which, by searching keywords related to the topic in scientific databases, the relevant researches were found and systematically reviewed. The search results were filtered by reviewing titles, abstracts, and content, and screened articles were evaluated using the CASP tool. Finally, 86 sources were selected and analyzed. By coding and categorizing the articles, nine main categories were identified as disadvantages and negative effects of TSP: negative effects on macroeconomics, negative effects on the production sector, unfair distribution, decreased welfare, failure to save or reduce energy consumption, energy smuggling and corruption, adverse effects on medicine and health, adverse effects on transportation, and adverse environmental effects. The findings can help to structurally reform the current method and prevent the repetition of past mistakes. Introduction The government pursues three main goals in paying subsidies, which include the optimal allocation of resources, economic stability, and fair income distribution. The inefficiency and unfairness of subsidy payment in Iran for many years have caused the government to implement the Targeted Subsidies Policy (TSP) in 2009. Several goals and justifications were proposed, including: 1) making the distribution system fair, 2) increasing economic efficiency, 3) creating more welfare effects of cash subsidy, 4) reducing the smuggling, 5) reducing government expenses, 6) ensuring transparency of cash subsidy, 7) protecting environmental.In the implementation process of TSP, policymakers followed two basic axes by making the energy prices real (market price). First, limited monthly quotas were allocated to each car with subsidized petrol pricing. Second, cash subsidy payments were made to households to improve income distribution. However, in practice, the intended goals failed to materialize and led to inefficient allocation of resources and market deviation.Previous research has focused on the implementation of TSP and has only studied specific aspects. Therefore, this research aims to identify the adverse effects of the implementation of TSP in various fields through conducting a systematic review with a meta-synthesis approach. It will clarify all negative effects and causes of its inefficiency. Methods and MaterialThis qualitative research, which utilized content analysis, is based on Sandelowski & Barroso's Meta-Synthesis method. The figure below briefly depicts its steps: First, sources were reviewed with the following criteria: geographical scope (Iran), language (English and Farsi), period (2010 to 2022), study method (qualitative, quantitative, mixed), analysis unit/society (all available resources regarding the implementation of the TSP), conditions of the study (evaluation of the effects of the implementation of the TSP), and type of resources (articles published in journals and conferences, news and interviews, and official analytical reports).Next, resources were systematically searched based on related keywords in different sources. Finally, 486 articles (403 Persian articles and 83 English articles) were found. After a detailed review of titles, abstracts, content, and research method in line with the research question and purpose, 112 articles were selected. By using the Critical Appraisal Skills Program (CASP) tool to evaluate the quality, 86 sources were used as the basis for this research.In the process of data analysis, 538 codes were identified and categorized into 46 sub-categories. By using the concepts of these codes, the adverse effects of the implementation of the TSP were identified in nine categories. The Kappa index was used to control the quality of the study, which was accepted due to the coefficient (0.733). Finding and Discussion Based on the frequency of findings (codes) in the analyzed sources, the identified categories are as follows: (1) negative effects on macroeconomics, (2) negative effects on the production sector, (3) unfair distribution, (4) decreased welfare, (5) failure to reduce energy consumption, even increase it (6) energy smuggling and corruption, (7) adverse effects on medicine and health, (8) adverse effects on transportation, and (9) adverse environmental effects (see Figure 1). The main reasons for the occurrence of these adverse effects, which led to inefficiency and failure to achieve the predetermined goal of TSP are as follows:The government's inability to accurately identify the target groups for the subsidy caused a waste of resources and even a deficit in the government's budget.Failure to increase the price of energy carriers in line with inflation has caused destructive effects.Allocation of petrol subsidy to cars, while low-income people mostly do not have any car.Payment of cash subsidy to all people, without having a significant effect on welfare, causes an increase in liquidity and waste of resources, and serious damage to the country's economic system.5.Failure to pay the share of the sectors mentioned in the law, such as production, health, and modernization of the transportation fleet, due to budget deficits.Due to political priorities, governments do not want to change the method of implementing this policy. Conclusion To provide an integrated and comprehensive view of the adverse effects of implementing the TSP after 12 years, this study analyzed all research conducted in this respect. The results of this meta-synthesis research showed nine main adverse effects of the implementation of the TSP. Based on the findings of the study and the suggestions made in the reviewed research, some practical solutions are suggested.The government's inability to accurately identify target groups is a structural weakness, and it is necessary to assume the impossibility of categorizing people's income levels. Therefore, to present an executive solution currently, it is necessary to allocate subsidies to people instead of cars so that people without vehicles can also benefit. In addition, the price of energy carriers should float and close to its global price.The government must stop the cash subsidy payment and replace it with other supporting methods. By setting energy pieces at the global leverl, government support payments to the public service sectors (mentioned in the law) can be guaranteed. Furthermore, reforming the country's economic structure in the long term should be prioritized instead of considering short-term political goals that are often propaganda.In conclusion, this study reveals that the implementation of TSP has resulted in numerous adverse effects on various sectors of Iran's economy and society. The identified reasons for these negative impacts can help policymakers to reform the current subsidy distribution system and prevent the repetition of past mistakes.
