KAPSARC – Domestic Oil Price Adjustments and Fiscal Reforms in an Oil-Exporting Economy: How Can They Improve Welfare and Employment?

This paper analyzes how increasing domestic oil prices in an oil-exporting country with a significant foreign workforce can improve the welfare and employment of the country's nationals.

It evaluates different domestic energy price adjustment schemes where additional fiscal revenues finance household transfers, subsidies to national labor, or tax reductions on foreign workers. The findings suggest that keeping domestic oil prices below international prices but not too low is optimal, and fiscal reforms including labor subsidies or tax cuts on foreign workers perform better than those relying solely on household transfers.