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The Debate: Would the Arab World be better off without Energy Subsidies?

Will Stebbins's picture
The Debate

Governments in the Arab world have long subsidized the price of energy. This gives citizens throughout the region access to cheap petrol and diesel, and electricity supplied at below-market rates. But what has been the real impact of subsidies, and do they justify the huge financial burden they place on national budgets? This is a critical question in the Middle East and North Africa (MENA), as the region represents a disproportionate share of the world’s energy subsidies.

Next Wave of Economic Reforms in India

Varun Sridharan's picture
Dr. Denis Medvedev, the World Bank Group’s Senior Country Economist, spoke at the Indian Institute of Management Calcutta on the Next Wave of Economic Reforms in India on 20th November, this year.  The talk focused on the challenges facing the Indian economy in achieving inclusive growth with a special focus on reducing poverty in the lower income states.
IIM Calcutta Discussion
Photo Credit: Roli Mahajan

In Argentina, a road that connects the present and the past of indigenous women

Verónica Raffo's picture
Also available in: Español
 

 
If someone asked you what can boost gender equality in rural and indigenous communities in Latin America, a road would probably not be your first answer.

Well, think again!

During a recent trip to northern Argentina, we visited one of the main attractions in the area: the Qom Culture Route (QCR), a corridor of seven cultural centers led by artisan Qom women - 10% of the indigenous population in the country belongs to this ethnic group - spread along the recently paved Route 3 in the province of Chaco, as part of the Ministry of Federal Planning, Infrastructure and Services’ Norte Grande Road Infrastructure Project, with support from The World Bank. The project has helped build these women’s community centers and trained them in entrepreneurial, associative and commercial skills.

Can commuting costs increase welfare? Israeli checkpoints and the ‘Thailandiyas’: Guest post by Alexei Abrahams

This is the third in our series of posts by students on the job market this year.
Puzzling Results:
Economists tend to believe that travel and trade costs reduce welfare. Trade papers like Irwin (2005), Redding & Sturm (2008), Storeygard (2014), and Etkes & Zimring (2014) draw on evidence from the United States, West Germany, sub-Saharan Africa, and the Gaza Strip to support this idea. One might reasonably expect, therefore, that the welfare of Palestinian commuters declined during the Second Palestinian Uprising (2000-2007), when the Israeli army deployed hundreds of roadblocks and checkpoints along the West Bank’s internal road network in order to defend Israeli civilian settlements. Although these obstacles were intended to deter and intercept militants, they had the unintended consequence of delaying Palestinian civilian travel between Palestinian towns, and from Palestinian towns to Israel (B’Tselem (2007), World Bank (2007)). Two World Bank working papers (Cali & Miaari (2014), van der Weide et al (2014)) take advantage of this ‘natural experiment’ to study the effects of travel costs on commuters’ welfare, finding that economic outcomes of Palestinians declined in the face of obstacle deployment. My job market paper, however, finds a very different result: while obstacles reduced the welfare of laborers in some towns, laborers from other towns actually benefited from obstacles. The salient outcome of obstacle deployment was not welfare reduction, but rather welfare inequality.

Empowering new generations to act

Paula Caballero's picture
Photo by CIAT via CIFOR FlickrWhen I look at the rate of resource depletion, at soil erosion and declining fish stocks, at climate change’s impacts on nearly every ecosystem, I see a physical world that is slowly but inexorably degrading. I call it the "receding reality"—the new normal—slow onset phenomena that lull us into passivity and acceptance of a less rich and diverse world.

In my lifetime, I have seen waters that were teeming with multi-colored fish, turn dead like an empty aquarium. I have seen the streets of Bogota, my home town, lose thousands of trees in a matter of years.

It’s tempting to feel demoralized. But as the world’s protected area specialists, conservationists and decision makers gather in Sydney, Australia, this week for the World Parks Congress, there is also much to hope for.

 

Corrosive Subsidies in MENA

Shanta Devarajan's picture

Air pollution in Cairo Half the world’s energy subsidies are in the Middle East and North Africa Region.  These subsidies have been criticized on grounds that they crowd out public spending on valuable items such as health, education and capital investment.  Egypt for instance spends seven times more on fuel subsidies than on health.  Furthermore, the allocation of these subsidies is heavily skewed towards the rich, who consume more fuel and energy than the poor.  In Yemen, the portion of fuel subsidies going to the richest quintile was 40 percent; the comparable figure in Jordan was 45 percent and in Egypt, 60 percent.
 

A Major Shift to Save India’s Precious Lives

Karla Gonzalez Carvajal's picture
Follow the author on Twitter: @KGonzalezCar
 
Traffic fatalities are one of the world’s leading causes of preventable deaths. If the numbers stay at current growth rates, traffic fatalities will become the world’s fifth-leading cause of death by 2030. Both the World Health Organization (WHO) and the United Nations (UN) have recognized road traffic injuries as a major global public health problem, with economic consequences that could affect the sustainable development of countries and hinder progress towards reducing extreme poverty and boosting prosperity.
 
In India, for example, almost 400 people are killed on roads every day. This is the equivalent of a jumbo jet plane crash but, unfortunately, road deaths don’t make headlines quite the same way. And there is no shortage of alarming examples regarding India’s road safety challenges, including:
 
  • India’s national highways are especially dangerous, accounting for only two percent of the country’s total road network, but more than 30 percent of road-related deaths and injuries.
  • Pedestrian fatalities are a large proportion of accidents. In New Delhi, for example, pedestrian fatalities account for 45-51 percent of all road traffic deaths.
  • Road traffic crashes in India cost the country an estimated annual GDP loss of three percent. (WHO estimates)
The good news is that India has taken the issue of road safety as a priority, thus shifting and adding resources to their national road safety agenda.

Mind the (funding) gap, next stop: Making some extra money

Daniel Pulido's picture
Follow the authors on Twitter: @danpulido and @IrenePortabales
 

A branded metro station in Madrid
Most metro systems around the world are unable to cover their operating costs with fare box revenues, let alone fund capital expenditures. According to data from international benchmarking programs CoMET and Nova, tariff revenues cover an average 75% of operating costs, while other commercial revenues provide about 15%, resulting in an operating deficit of 10%. Similarly, a back of the envelope exercise that we conducted for Latin American metro companies showed that these had an average operating deficit of 10% in 2012. When including capital expenditures, this deficit grew to 30%. There are of course examples of metro systems that do recoup their operating costs, such as Santiago de Chile and Hong Kong, but others like the Mexico City Metro only cover half of their operating expenses with fare revenues. We should all mind this funding gap as it is a significant impediment to maintaining service quality and addressing growing urban mobility needs.

Unfortunately, the underfunding of transit systems can become chronic as public budgets are under growing pressure and the most direct solutions for increasing revenues are hard to implement: increasing fares, for instance, has proved to be politically difficult and disproportionately affects the poor, who use public transport the most; and charging a price that fully covers the social cost of private vehicle usage (i.e., congestion charges) as a way to fund transit is also politically sensitive.

In that context, transit operators are increasingly looking at new ways to tap additional sources of commercial revenue and make up for funding shortfalls, often through agreements with the private sector. Although most examples are concentrated in developed countries, some metro systems in Latin America and the developing world are looking at ways to increase non-tariff revenues:

Nine Lessons for Bridging the Gap between Cities and Citizens

Soren Gigler's picture

 Jerry Kurniawan / World Bank

Recently, the lack of economic and social opportunities in many urban areas have triggered that the urban poor express a greater demand for a voice in local decision-making that affect their lives. An increasing number of city governments are realizing that open and responsive public institutions are imperative to achieving better and more sustained development results.
 
Important questions however remain: What is the impact of open government approaches to improving public services to poor communities? What are some examples of where the emerging Open Government approach has made a difference in the lives of the urban poor?


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