Abstract

Fossil fuel reform is on the agenda of most countries due to their negative effects on the economy and the environment. Several researches studied the impact of energy prices increase and subsidies removal on macroeconomic variables. Another issue that is less addressed in the literature is the effect of energy subsidies and consequently the effect of their removal on the industrial output structure of the economy. Even the few conducted empirical research focus on the effect of the price of energy not subsidies. This study explores the effect of the level of fossil fuel subsidy on the share of energy intensive industrial output from total output using data from 52 countries across Africa, Asia, Europe, North and South America during the period from 2003 till 2015. This study employs static as well as dynamic panel data analysis, namely Fixed Effects, Feasible Generalized Least Squares, and dynamic Arellano-Bond GMM estimators. The results show that electricity subsidy is the most effective source of energy subsidy in industry followed by coal subsidy where both subsidies cause the share of energy intensive manufacturing output from total manufacturing output to increase. This study provides evidence that electricity and coal subsidies provide a competitive advantage for energy intensive industries and increase their share of contribution to the total manufacturing output. However, this induced competitive advantage may not always help the economy reach the outmost potential. There could be other industries that deserve more support because of their ability to absorb unemployment and increase welfare in the economy. The results also show that countries that have switched to renewable clean sources of energy are countries that have shifted towards less energy intensive industries.

School

School of Business

Department

Economics Department

Degree Name

MA in Economics

Graduation Date

5-22-2019

Submission Date

May 2019

First Advisor

Noureldin, Diaa

Committee Member 1

Bouaddi, Mohamed

Committee Member 2

Ahmed, Neveen

Extent

61 p.

Document Type

Master's Thesis

Rights

The author retains all rights with regard to copyright. The author certifies that written permission from the owner(s) of third-party copyrighted matter included in the thesis, dissertation, paper, or record of study has been obtained. The author further certifies that IRB approval has been obtained for this thesis, or that IRB approval is not necessary for this thesis. Insofar as this thesis, dissertation, paper, or record of study is an educational record as defined in the Family Educational Rights and Privacy Act (FERPA) (20 USC 1232g), the author has granted consent to disclosure of it to anyone who requests a copy. The author has granted the American University in Cairo or its agents a non-exclusive license to archive this thesis, dissertation, paper, or record of study, and to make it accessible, in whole or in part, in all forms of media, now or hereafter known.

Institutional Review Board (IRB) Approval

Not necessary for this item

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