Estimating the Welfare Costs of Reforming the Iraq Public Distribution System : A Mixed Demand Approach
The Iraqi Public Distribution System is the largest universal, in-kind subsidy system in the world. In 2012, the Public Distribution System transfers accounted for as much as 30 percent of incomes of the poorest 10 percent of the Iraqi population a...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/171291497886159518/Estimating-the-welfare-costs-of-reforming-the-Iraq-public-distribution-system-a-mixed-demand-approach http://hdl.handle.net/10986/27305 |
| Summary: | The Iraqi Public Distribution System is
the largest universal, in-kind subsidy system in the world.
In 2012, the Public Distribution System transfers accounted
for as much as 30 percent of incomes of the poorest 10
percent of the Iraqi population and provided 70 percent of
the calories of the poorest 40 percent. In effect, the
Public Distribution System remains the only safety net
program that covers all the poor and vulnerable in the
country. Yet, it is a very inefficient and expensive means
to deliver transfers to the poor and creates distortions in
the economy as well as an unsustainable fiscal burden. The
fiscal crisis since mid-2014 has put reform of the Public
Distribution System back on the agenda. This paper employs a
mixed demand approach to analyze the consumption patterns of
Iraqi households and quantify the welfare impact of a
potential reform of the Public Distribution System in urban
areas. The results show that household consumption of Public
Distribution System items is relatively inelastic to changes
in price. Consumption is more inelastic for the poorest
quintiles and, for much of the population, these goods are
not inferior, but rather normal goods. Cross-sectional
comparisons suggest that with improvements in welfare
levels, and with well-functioning markets, some segments of
the population are substituting away from the Public
Distribution System and increasing their consumption of
market substitutes. The removal of all subsidies will
require compensating poor households by 74.4 percent of
their expenditures compared with nearly 40 percent for the
richest households in urban areas. |
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