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As crude oil prices reach new highs, there is renewed concern about how external shocks will affect growth and poverty in developing countries. This paper describes a macro-micro framework for examining the structural and distributional consequences of a significant external shock-an increase in the world price of oil-on the South African economy. The authors merge results from a highly disaggregative computable general equilibrium model and a micro-simulation analysis of earnings and occupational choice based on socio-demographic characteristics of the household. The model provides changes in employment, wages, and prices that are used in the micro-simulation. The analysis finds that a 125 percent increase in the price of crude oil and refined petroleum reduces employment and GDP by approximately 2 percent, and reduces household consumption by approximately 7 percent. The oil price shock tends to increase the disparity between rich and poor. The adverse impact of the oil price shock is felt by the poorer segment of the formal labor market in the form of declining wages and increased unemployment. Unemployment hits mostly low and medium-skilled workers in the services sector. High-skilled households, on average, gain from the oil price shock. Their income rises and their spending basket is less skewed toward food and other goods that are most affected by changes in oil prices.

Adverse impact --- Declining wages --- Economic research --- Economic Theory and Research --- Energy --- Energy Production and Transportation --- Equilibrium --- GDP --- Income --- Labor Policies --- Macroeconomics --- Macroeconomics and Economic Growth --- Markets and Market Access --- Poverty Reduction --- Rural Development --- Rural Poverty Reduction --- Social Protections and Labor --- Technical assistance --- Unemployment --- Wages

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This paper examines the short- and long-run economic impact of Egypt's energy subsidy reform in July 2014 (without and without compensating transfers for the bottom 40 percent of the income distribution) and the decline in global energy prices, as well as the long-run impact of phasing out the energy subsidies over a 5 year period. The analysis uses a Computable General Equilibrium model with 56 productive sectors, including 11 energy subsectors. The short-run analysis employs a two-stage factor market adjustment, with wages first fixed and then flexible. The long-run analysis is run in a recursive dynamic mode, capturing the impact of improved productivity and increased investment resulting from more efficient allocation of resources and reduction in government deficits. In the short run, the 2014 reforms lead to slightly lower consumption while investment increases strongly and production shifts from highly subsidized energy-intensive sectors such as energy, water and sanitation, and transport to other sectors (notably construction). The impact on overall consumer prices is limited. In the longer run, real GDP growth increases by about one percentage point relative to the baseline before the 2014 reform.

Activities --- Adverse Impact --- Agriculture --- Approach --- Balance --- Balance of Payments --- Base Year --- Benchmark --- Budget Deficits --- Capital --- Capital Use --- Cement --- Coal --- Consumers --- Consumption --- Controlled Prices --- Cost of Energy --- Costs --- Crude Oil --- Crude Oil Production --- Development Policy --- Diesel --- Diesel Fuel --- Distribution of Energy --- Domestic Energy --- Domestic Natural Gas --- Dry Natural Gas --- Dynamic Analysis --- Economic Efficiency --- Economic Implications --- Economic Performance --- Economic Sectors --- Economic Theory & Research --- Elasticities --- Elasticity --- Electric Power --- Electric Power Generation --- Electric Power Plants --- Electricity --- Electricity Generation --- Electricity Prices --- Employment --- Energy --- Energy and Environment --- Energy Costs --- Energy Extraction --- Energy Prices --- Energy Production and Transportation --- Energy Products --- Energy Use --- Environment --- Environment and Energy Efficiency --- Equilibrium --- Exports --- Fixed Prices --- Fuel --- Fuel Oil --- Fuel Subsidies --- Full Employment --- Gas --- Gas Output --- Gas Prices --- Gas Producer --- Gasoline --- GDP --- Generation --- Goods --- Government Expenditures --- Government Subsidies --- Growth Rate --- High Energy --- Higher Energy Prices --- Incentives --- Income --- Income Groups --- Inputs --- International Trade --- Investment --- LNG --- Macroeconomic Performance --- Macroeconomics --- Macroeconomics and Economic Growth --- Measurement --- Mobility --- Natural Gas --- Natural Gas Output --- Natural Gas Prices --- Natural Gas Pricing --- Oil --- Oil Exporters --- Oil Price --- Oil Producer --- Oil Production --- Oil Products --- Payments --- Petroleum --- Petroleum Products --- Power --- Power Generation --- Power Plants --- Power Sector --- Price --- Price Changes --- Price Elasticities --- Price Subsidies --- Prices --- Production Costs --- Productivity Growth --- Real GDP --- Refined Petroleum Products --- Sanitation --- Static Analysis --- Subsidy --- Tax --- Tax Revenue --- Total Costs --- Total Factor Productivity --- Total Factor Productivity Growth --- Trade --- Trade Balance --- Trade Deficit --- Transport --- Transport Costs --- Transport Economics Policy and Planning --- Transportation --- Utilities --- Value --- Value Added --- Wage Rates --- Wages --- Water