M. Ali Mokhtari

Abstract Recent estimates suggest that eliminating fossil fuel subsidies could prevent 1.6 million premature deaths annually by reducing air pollution, while also addressing the unequal distribution of resources. How unequal are the benefits of these subsidies? Using Iranian household expenditure data (1984–2019) covering three major subsidy reforms, this study estimates the inequality-reducing impact of replacing fuel subsidies with direct, universal, and unconditional cash transfers. Our robust estimates show that reallocating USD 1 per capita per day from fuel subsidies to direct cash transfers reduces the Gini coefficient of expenditure by 8 %. These findings underscore the redistributive potential of such reforms and their role in fostering more equitable and sustainable policy design.

New study of Iran's almost-UBI shows that replacing fossil fuel subsidies with a universal and unconditional cash transfer reduces consumption inequality by 8% per $30/mo per person.

Study by @alimok.bsky.social

www.sciencedirect.com/science/arti...

Thanks to @lorenzkueng.bsky.social (advisor), Molly Lipscomb (JEEM co-editor), and two anonymous referees. Grateful to USI and IdEP for a supportive environment. Paper: doi.org/10.1016/j.je...

Robustness: Sanctions ≠ driver. No systematic link with inequality around reforms; cash correlates with reductions. Results hold with sanction controls.

Long-run inequality: Expenditure Gini, 1984–2019, with reform timings marked. Post-reform drops align with cash waves.
Distributional anatomy: Decile shares over time, shown relative to Decile 8 (reform-neutral benchmark). Bottom deciles gain post-reform.

Policy lineage: “Oil-to-Cash” (Moss–Lambert–Majerowicz, 2015) argues for redirecting resource rents to citizens via direct transfers.
#CashTransfers @cgdev.org @worldbanknotes.bsky.social
@unep.org

Global context: Fossil-fuel subsidies are huge and concentrated in resource-rich economies; Iran ≈ $127B (latest year data). @iea.org

Mechanism: Household balance sheet microdata show a net cash surplus among poorer households—transfers more than offset higher energy costs. (Figures below)

New causal evidence in JEEM: Iran’s move from fuel subsidies to (near) universal cash transfers reduces inequality. Reallocating about $1 per person per day cuts the expenditure Gini by ~8%.
Paper: doi.org/10.1016/j.je... #EnvironmentalEconomics
@jeem-econ.bsky.social @usiidep.bsky.social @usi.ch

Everywhere UBI is relatively expensive. In Iran, the program was also expensive, accounting for approximately 7% of the country's Annual GDP during the first three years.

In the U.S case, Hoynes and Rothestein (2019) discuss that there would be also social stigma. Many poor households shy to register or receive such a specific aid, because of social norms pressure.

This paper discussed well the potential benefits and costs of UBI in the USA and advanced economics:
www.annualreviews.org/content/jour...

That’s why further research is essential. Previous studies already suggest that labor supply reductions from cash transfers are generally modest—not the dramatic declines some fear.

The truth is, we still know very little about the long-term impacts of Universal Basic Income. We don’t yet have enough evidence to say whether the short-term inflationary costs outweigh the long-term benefits.

The benefits might be far greater if the transfers support human capital investment—leading to a more productive labor force, reduced crime, higher long-term growth, and overall welfare gains, even for those funding the program.

Yes, demand may rise for basic goods, but what is the actual magnitude of inflation? And more importantly—what if the basic goods in question, such as nutrition and education, significantly improve quality of life and outcomes for the next generation?

When no one pays for UBI, demand naturally increases. But when high-income individuals—or heavy energy users, as in the case of Iran—bear the cost, their demand decreases, effectively turning the policy into a redistributive mechanism.

papers.ssrn.com/sol3/papers....

Notably, there is a large shift from child labor to schooling among children under 18 and the strongest consumption responses in education and nutrition, and no significant rise in spending on temptation goods. The paper is available on SSRN, papers.ssrn.com/sol3/papers....
#UBI
#Econtwitter

Transfers, net of energy prices change, exceed 50% of income per capita for the bottom 10% of the population and districts. Results reveal a significant reduction in inequality and challenge pessimistic views on labor supply reductions and increased consumption of non-productive goods.

My new findings on Iran’s 2010 Energy Subsidy to Cash Program show that it uniquely resembles a true Universal Basic Income (UBI) at the national level—even under the strict criteria of Hoynes and Rothstein (2019).

High-income groups did not benefit from the reform and likely wouldn’t in any UBI program. That’s what the data shows.
📄 Link to the paper: papers.ssrn.com/sol3/papers....

Inflation and sanctions have historically been high in the country, so income gains are adjusted for price changes. All monetary values reflect monthly inflation adjustments. Beyond that, non-monetary consumption of essential and productive goods rose significantly—but only for the bottom 60%.

MASSIVE new study of Iran's UBI-like monthly cash program:
- Adult work didn't go down
- CHILD LABOUR went down to focus on school
- Drug use didn't go up