The Reform of Energy Subsidies in Iran: The Role of Cash Transfers

We study Iran’s energy subsidy reform program of 2010 and argue that the key to its success was a cash transfer intended to compensate households for price increases. We use survey data from the first three months of the program, before other economic shocks confounded the picture, to study the program’s effect on the incomes and expenditures of households. We find that rural families that had less access to banks actually participated in greater numbers; that the poorest and richest income deciles participated least; and that, at least in its early phase, the program’s net effect was pro-poor. We argue this last fact explains the program’s smooth start.