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The study was undertaken during a summer internship at the IMF. The author would like to thank Chris Lane for many helpful comments and suggestions. The author is also grateful to David Coady, Mark Ellyne, Helmut Franken, Sylviane Guillaumont, Arend Kouwenaar, Jean-Claude Nachega, David Newhouse, Armin Schwidrowski, Saji Thomas, and seminar participants at the IMF. The usual disclaimer applies.
Of the increase, 0.9 percent is due to the cost of tax differentiation by route of importation, 0.71 percent represents the tax exemption received by the mining sector, and 0.23 percent constitutes the loss of petroleum revenue in 2004, assuming that oil tax rates remained constant between 2003 and 2004.
Mali imports oil products from the ports of Dakar, Abidjan, Lomé, and Cotonou.
The international oil price trend was obtained by using the Hodrick-Prescott filter.
Foreign goods are assumed to be perfectly competitive with domestically produced traded goods.
Producer prices are a function of intermediate goods costs and factor prices.
Note that t is a trade tax when we consider traded goods, but a domestic tax when we consider nontraded goods. A tax on domestic production of traded goods does not affect user prices, but reduces producer prices.
The input-output table is based on the following assumptions: homogeneity of output, no substitution between inputs, fixed proportion between inputs and outputs, absence of economies of scale, exogeneity of primary inputs, and final demand components.
In rural areas, a district is defined as a geographic area where 800 to 1,000 persons are living, whereas in urban areas the number of persons in each district ranges from 1,000 to 1,500.
They include coffee bean hulling, protection and treatment of crops, tool and agricultural machine rental.
This approach used by Deaton (1997) allows to compute the average expenditure effect at each level of expenditure per capita and as a result to look behind the average by quintile. It consists in assessing the relationship between the expenditures effects and the level of expenditure per capita without assuming a particular functional form.
In contrast to subsidy shares linked with the direct effect, those related to the indirect effect depend on the subsidy rate. From March 2003 to March 2005, international oil prices (in CFA francs) rose by 37.42 percent, while domestic oil prices increased by 16.64 percent. First, we compute the change in the prices of other goods following a 37.42 percent rise in oil prices. Second, we do the same thing for a 16.64 percent rise in oil prices. Finally, we calculate the difference between household expenditures under the two scenarios, which is equivalent to the amount of subsidies received by each household. Since petroleum products are aggregated in the input-output table, we are unable to compute the subsidy shares by quintile for each oil product. However, we could assume that subsidies associated with indirect expenditure effects are negligible when only kerosene is considered.
The impact estimated using the input-output approach is linearly proportional to the level of the price increase. In Mali, a 34 percent rise in oil prices leads to a 1.67 percent decrease in real income, and so real income will decrease by 0.98 percent if oil prices rise by 20 percent.
For instance, in Ghana, a 50 percent increase in the average oil price resulted from a 49 percent price increase for kerosene, 17 percent for gasoline, and 108 percent for LPG (liquefied petroleum gas). In the Islamic Republic of Iran, the increase in kerosene price is three times higher than that of gasoline. For Mali, increases in all oil product prices are equal.
In fact, the simulation of a 33 percent rise in oil prices is a weighted average of a 10 percent decrease in the gasoline price and a 67 percent increase in the price of diesel.
Inputs include domestic goods as well as imported goods.
Imported inputs are assumed to be perfectly competitive with domestic inputs.
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