20231026-IMF-Social_Unrests_and_Fuel_Prices_The_Role_of_Macroeconomic,_Social_and_Institutional_Factors_49页_1mb

Summary of "Social Unrests and Fuel Prices: The Role of Macroeconomic, Social and Institutional Factors"

This IMF Working Paper, authored by Ditable. Drabo et al. (2023), investigates the effect of fuel price increases on social unrests across 101 developing countries from 2001 to 2020. The study uses the instrumental variable (IV) fixed-effect estimator to control for endogeneity issues. Key findings indicate that fuel price increases are positively correlated with social unrests, amplified under conditions such as economic downturns, high exchange rate volatility, low government expenditure on health and education, high income inequality, institutional weakness, and widespread corruption. The results support the grievance and deprivation theory, where fuel price hikes are seen as unfair, potentially spurring protests, while no evidence supports the resource or political opportunities theories. Policy implications emphasize timing reforms during periods of strong economic growth and stable exchange rates, along with increased social spending, particularly in health and education, to mitigate unrest risks. Strengthening institutions and tackling corruption are also recommended for successful fuel subsidy reform.