In the context of global price shocks, governments often turn to subsidies to shield households and businesses from rising costs. While subsidies can provide immediate relief, they are also among the most contested policy instruments. Given how costly they are to sustain, subsidies often have regressive distributional impact making them notoriously difficult to reform.
In this concluding episode of our two-part discussion on subsidies, we explore why subsidy reform remains one of the most politically and economically challenging issues in social policy. If there is broad agreement that resources could often be used more effectively through targeted social protection, why do subsidies continue to persist? What political, institutional, and social factors make reform so difficult? And what lessons can be drawn from countries that have successfully transitioned towards more equitable and efficient systems?
We also examine the role of social protection in making the reforms feasible. As governments seek fiscal space to strengthen social protection systems and respond to economic, climate, and other shocks, compensatory cash transfers and adaptive social protection have increasingly been presented as viable alternatives to broad-based subsidies and strong enablers of a successful reform.
Meet our guests:
Dr. Neil McCulloch, Director, The Policy Practice
Tara Moayed, Governance and Social Development Consultant
For our Quick Wins segment, we spoke with Shaun Baugh, Programme Manager at Caribbean Community (CARICOM) Secretariat who shed light on the implications of the “Super El Niño”, alongside other climate and global shocks, for food security and vulnerable populations in the region.
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