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• pre-publication peer review (FINAL ROUND)
##### Decision Letter
2022/06/16

16-Jun-2022

Dear Solarin, Sakiru

It is a pleasure to accept your manuscript IJSE-11-2021-0675.R2, entitled "The impact of fossil fuel subsidies on income inequality: accounting for the interactive roles of corruption and economic uncertainty" in its current form for publication in International Journal of Social Economics. Please note, no further changes can be made to your manuscript.

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##### Reviewer report
2022/06/16

There is great improvement in the quality of the manuscript and hence is now publishable in the journal.

##### Reviewer report
2022/06/09

comments raised prior were attended to. the paper can be accepted for publication

##### Author Response
2022/05/30

We thank the editor for the comments on our paper entitled- “The impact of fossil fuel subsidies on income inequality: accounting for the interactive roles of corruption and economic uncertainty”. Based on the recommendations and suggestions, we have revised the paper, responded to the queries raised and made corrections accordingly.

Reviewer: 1

Recommendation: Minor Revision

on table 2 under source of data put the year. eg Euromonitor database (2022)
for panel data did you run the Dumitrescu and Hurlin Granger causality test? if yes, please specify that.

Response

Table 2: Descriptive of the data
Variables Expected Sign Symbol Description Source of data
Gini coefficient Dependent variable
It captures how unequally income is distributed in a country Euromonitor Database (2021)
Subsidies per capita Independent variable (+)
Real fossil fuel subsidies per capita data (in hundreds at US$2019 prices) International Energy Agency Database (2021) Real GDP per capita Independent variable (+) Real GDP per capita data (in hundreds at US$ 2019 prices) Euromonitor Database (2021)
Control of corruption Independent variable (-)
Perceptions of the degree at which public power is used for private benefit, including both major and minor forms of corruption World Bank (2021)

Uncertainty Independent variable (+)
The index covers uncertainty arising from long-term concerns as well as short-term political and economic developments Ahir et al. (2018)

Democracy index Independent variable (-)
It captures the presence of autocratic and democratic tendencies in a country Center for Systemic Peace (2021)

The data is for the period, 2010-2019.
Source: Researcher’s Construct

“In Supplementary Table 3, the results of the causality test of Dumitrescu and Hurlin (2012) on the series are reported. The Dumitrescu and Hurlin (2012) method controls for possible cross-sectional dependence in panel data.”

Table 7: The results of the causality test of Dumitrescu and Hurlin (2012)
H0 F-statistic Probability value
SUBPC ↛ GINI 2.825 0.080
GDPPC ↛ GINI 4.151
0.043
COR ↛ GINI 7.051
0.008
UNCER ↛ GINI 4.507
0.049
DEMO ↛ GINI 8.076
0.005
GINI ↛ SUBPC 5.226** 0.000
GINI ↛ GDPPC 4.891** 0.035
GINI↛ COR 0.092 0.761
GINI ↛ UNCER 7.964
0.005
GINI ↛ DEMO 0.908 0.341
Note: H0 is the null hypothesis. ↛ implies “does not Granger cause”. ,, show the significance at the 1%, 5% and 10% levels. Due to space, causality results that do not involve GINI are not reported. The data is for the period, 2010-2019.
Source: Researcher’s Construct

References
Ahir, H., Bloom, N., & Furceri, D. (2018). The World Uncertainty Index. Available at https://www.policyuncertainty.com/media/WUI_mimeo_10_29.pdf (accessed on 29th December, 2020)
Center for Systemic Peace (2021). Polity5 Annual Time-Series, 1946-2018. Available at http://www.systemicpeace.org/inscrdata.html (accessed on 30th May, 2021).
Dumitrescu, E. I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic modelling, 29(4), 1450-1460.
Euromonitor Database (2021). Euromonitor Statistics. https://www.euromonitor.com/our-expertise/passport (accessed on 30th May, 2021).
International Energy Agency Database (2021). Data and Statistics. Available at https://www.iea.org/data-and-statistics (accessed on 29th May, 2021).
World Bank (2021). World Development Indicators. Available at www.data.worldbank.org (accessed on 30th May, 2021).

Originality: Does the paper contain new and significant information adequate to justify publication?: yes, suggested changes reflect new information.
Response
Thank you

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: the literature review is sufficient and recent sources were used.

Research problem must not form part of the introduction.
Response
The research problem is now as follows:

2.0 Research problem

“Income inequality is still high among the developing countries, fossil fuel subsidies are much greater in the developing economies (International Energy Agency Database, 2021). The developing countries are jointly responsible for more than 70% of the global fossil fuel subsidies in 2010-2018 (International Energy Agency Database, 2021). Fossil fuel subsidies in the 31 developing countries under observation expanded by almost 17% in 2010-2018 (International Energy Agency Database, 2021).”

“In the developing countries, income inequality is a multifaceted concept that is motivated by several underlying factors including economic expansion and corruption (International Monetary Fund, 2020). In order to effectively address income inequality, there is a need to determine the factors of income inequality in these nations. One of the possible factors of income inequality that has not been sufficiently probed in the extant papers is fossil fuel subsidies. Authorities in the developing nations have been persistent in providing fossil fuel subsidies with the perceptive that such fiscal activity will improve income distribution in their respective nations (International Monetary Fund, 2013). Nevertheless, the impact of fossil fuel subsidies can barely be defined without an in-depth empirical study because fossil fuel subsidies can have mixed effects on income inequality.”

objectives should be stated separately, below the
Response

The objectives are now stated as follows:

“The aim of this study is to examine the drivers of income inequality in 31 developing countries. The first addition of this study to the literature is the focus on the fossil fuel subsidies and income inequality relationship, which has not been sufficiently treated in the existing literature. The difference between the current study and that of Couharde and Mouhoud (2020) is that while the current study has used econometrics tools in the methodology, the latter has used descriptive statistics to analyse the relationship between fossil fuel subsidies and income inequality. Secondly, it is hypothesized that corruption and uncertainty play vital roles in moderating the nexus between fossil fuel subsidies and income distribution. Corruption, which is regarded as the degree at which public power is used for private benefit, decreases the effectiveness of government spending and programmes (including subsidies) (Fang, Lerner, Wu and Zhang, 2019). In a regime of acute corruption, fossil fuel subsidies tend to worsen income inequality situation in the country. Uncertainty is regarded as the inability of economic agents to foreknow the effects of trade; fiscal and monetary policies (Ahir, Bloom and Furceri, 2018). Greater level of ambiguity of policies in the economy reduces the general effectiveness of fossil fuel subsidies and might worsen its negative impact on income inequality.”

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: the method used is fit for research
Response
Thank you

Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: justice was done to link results with the aim of the research
Response
Thank you

Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: paper identifies clearly implications for research
Response
Thank you

Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: communication improved as compared to the last paper submitted.

Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?:

This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: Yes, I would like my name to appear with my report on Publons
Response
Thank you

Reviewer: 2

Recommendation: Accept
Response
Thank you

There is great improvement in the quality of the manuscript as compared to the earlier draft and hence is now publishable in the journal.
Response
Thank you

Originality: Does the paper contain new and significant information adequate to justify publication?: Yes
Response
Thank you

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: No the literature review is adequate
Response
Thank you

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: The paper is built on a sound methodological framework
Response
Thank you

Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: Yes it does
Response
Thank you

Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: Yes
Response
Thank you

Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: Yes the manuscript is free from grammatical errors
Response
Thank you

Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?: Yes
Response
Thank you

This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: No, I would not like my name to appear with my report on Publons
Response
Thank you

##### Cite this author response
• pre-publication peer review (ROUND 2)
##### Decision Letter
2022/05/23

23-May-2022

Dear Dr. Solarin:

Manuscript ID IJSE-11-2021-0675.R1 entitled "The impact of fossil fuel subsidies on income inequality: accounting for the interactive roles of corruption and economic uncertainty" which you submitted to the International Journal of Social Economics, has been reviewed. The comments of the reviewers are included at the bottom of this letter.

One of the reviewers still has recommended revisions to the submitted manuscript, before it can be considered for publication. Therefore, I invite you to respond to the reviewer's comments and revise your manuscript.

To revise your manuscript, log into https://mc.manuscriptcentral.com/ijsec and enter your Author Centre, where you will find your manuscript title listed under "Manuscripts with Decisions." Under "Actions," click on "Create a Revision." Your manuscript number has been appended to denote a revision.

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Once again, thank you for submitting your manuscript to the International Journal of Social Economics and I look forward to receiving your revision.

Sincerely,
Dr. Stefan Mann
Editor, International Journal of Social Economics

Reviewer: 1

Recommendation: Minor Revision

on table 2 under source of data put the year. eg Euromonitor database (2022)
for panel data did you run the Dumitrescu and Hurlin Granger causality test? if yes, please specify that.

Originality: Does the paper contain new and significant information adequate to justify publication?: yes, suggested changes reflect new information.

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: the literature review is sufficient and recent sources were used.

Research problem must not form part of the introduction.

objectives should be stated separately, below the

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: the method used is fit for research

Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: justice was done to link results with the aim of the research

Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: paper identifies clearly implications for research

Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: communication improved as compared to the last paper submitted.

Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?:

This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: Yes, I would like my name to appear with my report on Publons

Reviewer: 2

Recommendation: Accept

There is great improvement in the quality of the manuscript as compared to the earlier draft and hence is now publishable in the journal.

Originality: Does the paper contain new and significant information adequate to justify publication?: Yes

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: No the literature review is adequate

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: The paper is built on a sound methodological framework

Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: Yes it does

Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: Yes

Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: Yes the manuscript is free from grammatical errors

Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?: Yes

This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: No, I would not like my name to appear with my report on Publons

##### Reviewer report
2022/04/29

There is great improvement in the quality of the manuscript as compared to the earlier draft and hence is now publishable in the journal.

##### Reviewer report
2022/04/11

on table 2 under source of data put the year. eg Euromonitor database (2022)
for panel data did you run the Dumitrescu and Hurlin Granger causality test? if yes, please specify that.

##### Author Response
2022/04/01

We thank the editor for the comments on our paper entitled- “The impact of fossil fuel subsidies on income inequality: accounting for the interactive roles of corruption and economic uncertainty”. Based on the recommendations and suggestions, we have revised the paper, responded to the queries raised and made corrections accordingly.

Reviewer: 1

Recommendation: Accept
Response
Thank you

Originality: Does the paper contain new and significant information adequate to justify publication?: yes
Response
Thank you

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: there is no empirical literature review done.
Response
We have added the following in the literature review:
“There are also cost of subsidies beyond the fiscal cost of subsidies. The cost of negative externalities triggered by fossil fuels and such subsidies include road damage, accidents and congestion (McCulloch, Moerenhout and Yang. 2021).”
“Fossil fuel subsidies frequently follow a life cycle. Subsidies typically start as price stabilization policies principally intended to decrease exposure of low-income consumers to price volatility (Inchauste and Victor, 2017). Eventually, the majority of the subsidies favour special interests (to the extent that the well-organized these groups can exercise leverage on the government) but not the poor in the society (Inchauste and Victor, 2017).”

“Fossil fuel subsidies shift consumption towards energy products and away from products whose price reflects market conditions (Inchauste and Victor, 2017).”
“It has also been argued that subsidies are usually introduced by autocracies for political survival as against uplifting the welfare of the poor in the rural areas. Political survival of an authoritarian government often relies on the support of urban citizens. Therefore, the benefits of low prices flow to the urban constituencies as against low-income earners who mainly reside in rural areas (Kim and Urpelainen, 2016). Once instituted, fossil fuel subsidies are hardly to revert (Mahdavi, Martinez-Alvarez and Ross, 2020).”
“Authorities usually introduce fossil fuel subsidies to facilitate energy availability and access (Erickson, Down, Lazarus and Koplow, 2017).”
“Some countries, especially the developing ones do not have sufficient institutional capacity to efficiently redistribute wealth. Hence, fossil fuel subsidies can serve as viable channels through which wealth can be redistributed in countries that lack institutional capacities to reallocate wealth through other channels (Cheon, Urpelainen and Lackner, 2013).”
“Corruption is prevalent in the public sectors of several developing countries (Addo, 2021). Since public sectors are frequently required to administer fossil fuel subsidies in the developing countries, fossil fuel subsidies will not be properly allocated. Hence, corruption is likely to lead to greater fossil fuel subsidies in the developing countries. Corruption negatively affects the institutional capacity of political authorities to provide relevant public services, decreases economic growth and subsequently increase income inequality (Melki, 2022).”
“Uncertainty affects the redistributive power of fiscal policies in the developing countries (Jouini, Lustig, Moummi and Shimeles, 2018). Hence, more fossil fuel subsidies are needed for impact of subsidies to be felt in the developing countries. Increasing uncertainty forces households to be more precautionary in their spending (Basu and Bundick, 2017) and exacerbates financing costs of firms (Gilchrist, Sim and Zakrajšek, 2014). Decrease in consumer spending couple with increasing financing costs of firms lead to a decrease in economic growth and increase in income inequality.”
“Another possible determinant of income inequality is democratization. This is because democratization leads to more economic opportunities for the low-income section of the country and thus plummeting income inequality. It also assists nations to implement favourable market reforms and undertake welfare-oriented redistributive programmes (Islam, 2018). By decentralising power to the poorer sections of the country, democratization may intensify the roll-out of pro-poor policies and therefore decreasing inequality (Acemoglu, Naidu, Restrepo and Robinson, 2015).”
References
Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2015). Democracy, redistribution, and inequality. In Handbook of income distribution (Vol. 2, pp. 1885-1966). Elsevier.
Addo, A. (2021). Controlling petty corruption in public administrations of developing countries through digitalization: An opportunity theory informed study of Ghana customs. The Information Society, 37(2), 99-114.
Basu, S., & Bundick, B. (2017). Uncertainty shocks in a model of effective demand. Econometrica, 85(3), 937-958.
Cheon, A., Urpelainen, J., & Lackner, M. (2013). Why do governments subsidize gasoline consumption? An empirical analysis of global gasoline prices, 2002–2009. Energy Policy, 56, 382-390.
Erickson, P., Down, A., Lazarus, M., & Koplow, D. (2017). Effect of subsidies to fossil fuel companies on United States crude oil production. Nature Energy, 2(11), 891-898.
Gilchrist, S., Sim, J. W., & Zakrajšek, E. (2014). Uncertainty, financial frictions, and investment dynamics (No. w20038). National Bureau of Economic Research, 20038.
Inchauste, G., & Victor, D. G. (Eds.). (2017). The political economy of energy subsidy reform. World Bank Publications.

Islam, M. R. (2018). Wealth inequality, democracy and economic freedom. Journal of Comparative Economics, 46(4), 920-935.
Jouini, N., Lustig, N., Moummi, A., & Shimeles, A. (2018). Fiscal policy, income redistribution, and poverty reduction: Evidence from Tunisia. Review of Income and Wealth, 64, S225-S248.
Kim, S. E., & Urpelainen, J. (2016). Democracy, autocracy and the urban bias: Evidence from petroleum subsidies. Political Studies, 64(3), 552-572.
Mahdavi, P., Martinez-Alvarez, C. B., & Ross, M. L. (2020). Why do governments tax or subsidize fossil fuels?. Center for Global Development Working Paper, 541, 1-72.
McCulloch, N., Moerenhout, T., & Yang, J. (2021). Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis. Energy policy, 156, 112336.
Melki, M. (2022). Inequality and investment: The role of institutions. Economic Modelling, 108, 105736.

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: yes
Response
Thank you
Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: Table 1 has no explanation. there are no diagnostics tests, ( unit root etc) , post estimation tests to be clearly presented
Response
We have added unit root test to Table 1 as follows:
“The unit root properties of the series under investigation have also been tested, using the test of Levin, Lin and Chu (2002). The null hypothesis of the test is that a series is nonstationary but the results suggest that all the series are stationary.”

Table 1: Descriptive statistics
Variables Mean Median Coefficient of Variation Unit root

42.563 41.600 0.129 -8.034*** (1)

3.954 1.321 1.624 -3.179*** (1)

98.972 47.565 1.503 -3.837*** (1)

-0.539 -0.566 1.102 -14.656*** (1)

0.210 0.180 0.811 -5.634*** (1)

0.197 2.000 34.480 -10.378 (1)
indicates rejection of unit root at 1% significance level. The figures in () are the probability values.
Source: Researcher’s Construct

The other diagnostics tests have been reported in Table 3, Table 4 and Table 5. For instance, under Table 3, we have the following:
Table 3: Determinants of Income Inequality, Difference GMM estimator
VARIABLE 1 2 3 4 5 6 7 8
CONSTANT -0.015 (0.000) -0.014 (0.000) 0.014 (0.000) -0.040 (0.000) -0.031 (0.000) -0.039 (0.000) -0.029 (0.000) -0.026 (0.000)

0.531 (0.000) 0.526 (0.000) 0.079 (0.000) 0.748 (0.000) 0.644 (0.000) 0.674 (0.000) 0.668 (0.000) 0.663 (0.000)

0.006 (0.004) 0.007 (0.000) 0.003 (0.720) 0.011 (0.000) 0.001 (0.837) 0.004 (0.051) -0.005 (0.021) -0.010*** (0.000)

-0.002 (0.001) -0.003 (0.000) 0.001 (0.719) 0.002 (0.028) -0.002* (0.025) -0.002 (0.000) -0.001** (0.000) 0.001 (0.062)

-0.013 (0.000) -0.010 (0.120) 0.005 (0.184) 0.026 (0.000)

0.003 (0.914) 0.251 (0.000) -0.148 (0.000) 0.341*** (0.000)

-0.008*** (0.000) 0.001 (0.945)

-0.002 (0.000)
0.035
(0.000)
Number of observations 186 186 186 186 248 217 248 248
Instruments used 36 37 37 34 45 36 41 41
AR(1)test -2.202 (0.028) -2.188* (0.029) -0.767 (0.443) -2.209 (0.027) -2.186 (0.029) -2.080 (0.038) -2.201 (0.028) -2.218** (0.027)
AR(2)test 1.027 (0.143) 1.077 (0.133) 0.293 (0.769) 0.087 (0.931) -0.321 (0.748) -0.719 (0.472) -0.399 (0.690) -0.449 (0.654)
Sargan over-identification test 28.5600 (0.539) 28.126 (0.564) 18.477 (0.619) 25.851 (0.471) 21.989 (0.958) 24.341 (0.611) 29.877 (0.714) 29.029 (0.751)
Wald (joint) test 547815
(0.000) 230299 (0.000) 88660.7 (0.000) 26979.8 (0.000) 13038.9 (0.000) 29691.3 (0.000) 159841 (0.000) 124120 (0.000)
Cross-sectional dependence test -0.805 (0.421) -0.582 (0.560) -1.071 (0.284) 1.112 (0.266) -0.997 (0.319) -0.171 (0.864) -1.130 (0.259) -1.099 (0.272)
,
and *** indicate that the outputs are significant at 10%, 5% and 1% levels. The parentheses are containing the probability values. AR denotes autoregressive.
Source: Researcher’s Construct
“The diagnostics tests reveal over-identification restriction and second-order autocorrelation do not exist in the analysis. The regressors are jointly significant. There is no cross-sectional dependence in the analysis because the null of no cross-sectional dependence cannot be rejected.”

Reference
Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of econometrics, 108(1), 1-24.
Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: fairly done , but not properly presented. it requires polishing.

Response
“There is also a need to institute more democratic values (including rule of law, civil liberties and representation of minorities) as part of the efforts to reduce income inequality in these countries.”
Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: work require language editing. there is no flow on some paragraphs but author(s) have tried.
Response
We have done language editing and try to ensure flow in all the paragraphs.
Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?: yes it is appropriate, but some missing information must be supplied. see commented document
Response
Thank you
This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: Yes, I would like my name to appear with my report on Publons

Response
Thank you
Reviewer: 2

Recommendation: Major Revision

Dear Editor.
I hereby submit the review report of manuscript IJSE-11-2021-0675 titled: The impact of fossil fuels subsidy on income inequality: accounting for the interactive roles of corruption and economic uncertainty. I wish to commend the authors of this article for doing a great job. Below are my comments to the author and I hope it is useful to such purpose.
1. The authors argument in page 4, line 19-23 that it has been contended that fossil fuels subsidy causes distortions, which aggravate inequality because wealthier households are likely to benefit more from subsidies in most developing countries, skewing the current income distribution is unclear. What are those distortions caused by fossil fuels subsidy. This will be very difficult for most readers to understand.
Response
We have added the following to the sentence concerned:
“which is when current prices differ from the fundamental values of fossil fuels”
2. The author’s choice of the 31 selected developing countries being that there are available datasets for income inequality, GDP per capita, fossil fuels subsidy, corruption and uncertainty index for them is quite weak not enough justification. Author may perhaps consider leveraging on other choices like being the highest in terms of income inequality and fossil fuel subsidies.
Response
You are very right with your observation. However, the data for fossil fuel subsidies started in 2010. Therefore, if we are to just focus on the countries with the highest income inequality or fossil fuel subsidies, we will have insufficient data to conduct the analysis.
3. Author should provide a reference in page 9, line 35 which states that estimates provide a nation's score that is oscillating from -2.5 to 2.5.
Response
“(Tang, Chen, Zhou, Warkentin and Gillenson, 2019)”
Reference
Tang, Z., Chen, L., Zhou, Z., Warkentin, M., & Gillenson, M. L. (2019). The effects of social media use on control of corruption and moderating role of cultural tightness-looseness. Government Information Quarterly, 36(4), 101384.
4. Author did not provide enough justification for using the GMM approach.
Response
“GMM method deals well with endogeneity issues because it uses past forms of a series as instruments for such series. Hence, there is no need to use economic variables (which not be actually exogenous variables) as instruments in a regression. Through the Sargan test, it is very easy to determine the validity of the instruments used. The method requires minimal assumptions about the data generating process (Bundell and Bond, 1998)”
Reference
Blundell, R., and S. Bond. S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87, 115–143.

1. The results show that the interaction term between fossil fuels subsidy and corruption is negative and significant, which implies that an increase in corruption will increase the impact of fossil fuels subsidy on income inequality. The above statement is incorrect as a negative relationship implies that when one variable is increasing, the other will be decreasing. Author should relook into the above result.
Response
This is because of the index of corruption that we are using. The bigger the corruption index, the lower the level of corruption in the country. Hence, while the coefficient is negative, in reality, it means an increase in corruption will mean an increase in the effect of fossil fuel subsidies on income inequality. Please see the footnote:
“This is because control of corruption estimate is used analysis. The higher the score, the lower the corruption in the country.

Originality: Does the paper contain new and significant information adequate to justify publication?: Yes

Response
Thank you
Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: Not really
Response
Thank you

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: Yes
Response
Thank you

Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: Yes it did
Response
Thank you

Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: Yes implications are consistent with the findings.
Response
Thank you

Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: Manuscript needs professional editing as there are few grammatical errors.
Response
Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?: Yes
Response

Thank you

This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: No, I would not like my name to appear with my report on Publons
Response
Thank you

Reviewer: 3

Recommendation: Major Revision

The topic that this paper seeks to address is topical and relevant, namely the impact of fossil fuel subsidies (FFS) on income inequality, taking into account corruption and uncertainty. The author(s) are familiar with the most relevant discussions regarding FFS as well as income inequality, although I am not an expert on the latter topic. The methods appear sound, again with the caveat that I am not an expert on quantitative methods.
However, the paper also suffers from important shortcomings, which should be addressed before the manuscript can be considered for publication.
Response
Thank you

First, I think the causal model should be further elaborated or at least explained better. As the author(s) argue, FFS may impact income inequality. Yet, it is also possible to imagine the reverse causal relationship: that countries with high levels of income inequality adopt higher levels of fossil fuel subsidies as an instrument to address this inequality. Furthermore, several factors may impact FFS levels as well as income inequality. Corruption and uncertainty are two such factors, governance capacity – highly correlated with corruption but not reduceable to it – (Commander, 2012; Cheon et al., 2013), as well as levels of democracy (Overland, 2010; Kim and Urpelainen, 2015) constitute other examples. I would recommend that the authors discuss these causal relations in more detail, including how the corruption and uncertainty may influence both FFS and inequality, and include more variables in their model (particularly fossil fuel reserves, governance, democracy)
Response
We have now conducted a causality test. Please see:
“In Table 7, the results of Granger causality test of the series are reported. The results suggest that there is a unidirectional causality from corruption to income inequality and a unidirectional causality from democratization to income inequality. The results further indicate that there is bidirectional causality between income inequality and the other variables.”

Table 7: The results of Granger causality test
H0 F-statistic Probability value
SUBPC ↛ GINI 2.825 0.080
GDPPC ↛ GINI 4.151
0.043
COR ↛ GINI 7.051
0.008
UNCER ↛ GINI 4.507
0.049
DEMO ↛ GINI 8.076
0.005
GINI ↛ SUBPC 5.226** 0.000
GINI ↛ GDPPC 4.891** 0.035
GINI↛ COR 0.092 0.761
GINI ↛ UNCER 7.964
0.005
GINI ↛ DEMO 0.908 0.341
Note: H0 is the null hypothesis. ↛ implies “does not Granger cause”. ,, show the significance at the 1%, 5% and 10% levels. Due to space, causality results that do not involve GINI are not reported..
Source: Researcher’s Construct
We have discussed more causal relationship involving corruption, uncertainty fossil fuel subsidies and income in equality as follows: Please see:
“Corruption is prevalent in the public sectors of several developing countries (Addo, 2021). Since public sectors are frequently required to administer fossil fuel subsidies in the developing countries, fossil fuel subsidies will not be properly allocated. Hence, corruption is likely to lead to greater fossil fuel subsidies in the developing countries. Corruption negatively affects the institutional capacity of political authorities to provide relevant public services, decreases economic growth and subsequently increase income inequality (Melki, 2022).”

“Uncertainty affects the redistributive power of fiscal policies in the developing countries (Jouini, Lustig, Moummi and Shimeles, 2018). Hence, more fossil fuel subsidies are needed for impact of subsidies to be felt in the developing countries. Increasing uncertainty forces households to be more precautionary in their spending (Basu and Bundick, 2017) and exacerbates financing costs of firms (Gilchrist, Sim and Zakrajšek, 2014). Decrease in consumer spending couple with increasing financing costs of firms lead to a decrease in economic growth and increase in income inequality.”

References
Addo, A. (2021). Controlling petty corruption in public administrations of developing countries through digitalization: An opportunity theory informed study of Ghana customs. The Information Society, 37(2), 99-114.
Basu, S., & Bundick, B. (2017). Uncertainty shocks in a model of effective demand. Econometrica, 85(3), 937-958.
Jouini, N., Lustig, N., Moummi, A., & Shimeles, A. (2018). Fiscal policy, income redistribution, and poverty reduction: Evidence from Tunisia. Review of Income and Wealth, 64, S225-S248.
Melki, M. (2022). Inequality and investment: The role of institutions. Economic Modelling, 108, 105736.

We have also included democracy into the model. We are unable to introduce all the variables you mentioned because the data for subsidies started in 2010. So including all the variables will negatively affect the degrees of freedom among other issues. Please see the followings on democracy:

“Another possible determinant of income inequality is democratization. This is because democratization leads to more economic opportunities for the low-income section of the country and thus plummeting income inequality. It also assists nations to implement favourable market reforms and undertake welfare-oriented redistributive programmes (Islam, 2018). By decentralising power to the poorer sections of the country, democratization may intensify the roll-out of pro-poor policies and therefore decreasing inequality (Acemoglu, Naidu, Restrepo and Robinson, 2015).”

“Democracy index is based on Policy2 score and the score ranges from -10 to +10 with -10 representing perfect autocracy and +10 depicting consolidated democracy. A country which has a score that is between -10 to -6 is regarded as an autocracy while a country with a score that is between -5 to +5 is regarded as an anocracy and a country with a score that is between +6 to +10 is regarded as a democracy (Rooney, 2019).”
“The results also show that democratization leads to a lower income inequality”
References
Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2015). Democracy, redistribution, and inequality. In Handbook of income distribution (Vol. 2, pp. 1885-1966). Elsevier.
Islam, M. R. (2018). Wealth inequality, democracy and economic freedom. Journal of Comparative Economics, 46(4), 920-935.
Rooney, B. (2019). Emergency powers in democratic states: Introducing the democratic emergency powers dataset. Research & Politics, 6(4), 2053168019892436.
Second, while the discussion of corruption is straightforward, what uncertainty exactly refers to and why it is operationalized using the Economist Intelligence Unit requires more elaboration. To me, how frequently uncertainty is used in reference to a country seems like a somewhat imprecise measure of uncertainty, and other ways of operationalizing uncertainty should be considered. In order to properly assess whether this is an adequate measure of uncertainty, it is first necessary that the author(s) clarify exactly what the term refers to.
Response
We have also added the following sentences to make uncertainty clearer:
“The EIU reports contains vital political and economic developments in each country, in addition to the analysis and forecasts of economic, policy and political conditions. For example, the index covers uncertainty arising from long-term concerns as well as short-term political and economic developments. In a bid to ensure the consistency of the index across all countries, the raw counts are normalized using the aggregate number of words in each report (Ahir et al., 2018).”

Reference
Ahir, H., Bloom, N., & Furceri, D. (2018). The world uncertainty index. Available at https://www.policyuncertainty.com/media/WUI_mimeo_10_29.pdf (accessed on 29th December, 2020)

Third, in terms of data, I wonder why the author(s) use the IEA price-gap data rather than the data in the Fossil Fuel Subsidy Tracker. The latter two databases are more comprehensive in terms of including subsidies that do not lower fossil fuel prices below the bench mark price, especially production subsidies and tax rebates. If the author(s) decide to stick to the IEA data, they should at least justify this choice and clarify that this entails focusing on solely consumption subsidies. Such justification should also refer to the IMF’s method of including the non-pricing of externalities. Furthermore, statements such as “The fossil fuel subsidy is aimed at protecting local industries…”, apply mainly to subsidies not captured by the price-gap approach, and should be revised
Response
“The reason for using the subsidies of International Energy Agency Database is because it focusses solely consumption subsidies. This dataset also differs from subsidies data of the International Monetary Fund, which is based on the method of including the non-pricing of externalities.”
We have deleted this statement from the paper:
The fossil fuels subsidy is aimed at protecting local industries including energy industries– and in the process retain employment and income opportunities for millions of people (Muniyoor, 2020).
Fourth, more references to academic publications should be added, and more effort should be made to place contribution of the manuscript to the academic literature. For instance, I would like to know more about how their contribution goes beyond Couharde & Mouhoud (2020). Furthermore, a lot of the references are to publications by International Organizations (e.g. IMF, UNDP), and these should be supplemented by references to academic publications. In this respect, political economy publications such as Cheon et al., 2013; Mahdavi et al 2020; Kim and Urpelainen, 2015; Inchauste and Victor 2017; Erickson et al 2017; McCulloch et al 2021 could also be useful.
Response
We have added the following in the literature review:

“There are also cost of subsidies beyond the fiscal cost of subsidies. The cost of negative externalities triggered by fossil fuels and such subsidies include road damage, accidents and congestion (McCulloch, Moerenhout and Yang, 2021).”
“Fossil fuel subsidies frequently follow a life cycle. Subsidies typically start as price stabilization policies principally intended to decrease exposure of low-income consumers to price volatility (Inchauste and Victor, 2017). Eventually, the majority of the subsidies favour special interests (to the extent that the well-organized these groups can exercise leverage on the government) but not the poor in the society (Inchauste and Victor, 2017).”

“Fossil fuel subsidies shift consumption towards energy products and away from products whose price reflects market conditions (Inchauste and Victor, 2017).”
“Authorities usually introduce fossil fuel subsidies to facilitate energy availability and access (Erickson, Down, Lazarus and Koplow, 2017).”
“Some countries, especially the developing ones do not have sufficient institutional capacity to efficiently redistribute wealth. Hence, fossil fuel subsidies can serve as viable channels through which wealth can be redistributed in countries that lack institutional capacities to reallocate wealth through other channels (Cheon, Urpelainen and Lackner, 2013).”
“Corruption is prevalent in the public sectors of several developing countries (Addo, 2021). Since public sectors are frequently required to administer fossil fuel subsidies in the developing countries, fossil fuel subsidies will not be properly allocated. Hence, corruption is likely to lead to greater fossil fuel subsidies in the developing countries. Corruption negatively affects the institutional capacity of political authorities to provide relevant public services, decreases economic growth and subsequently increase income inequality (Melki, 2022).”
“Uncertainty affects the redistributive power of fiscal policies in the developing countries (Jouini, Lustig, Moummi and Shimeles, 2018). Hence, more fossil fuel subsidies are needed for impact of subsidies to be felt in the developing countries. Increasing uncertainty forces households to be more precautionary in their spending (Basu and Bundick, 2017) and exacerbates financing costs of firms (Gilchrist, Sim and Zakrajšek, 2014). Decrease in consumer spending couple with increasing financing costs of firms lead to a decrease in economic growth and increase in income inequality.”
“Another possible determinant of income inequality is democratization. This is because democratization leads to more economic opportunities for the low-income section of the country and thus plummeting income inequality. It also assists nations to implement favourable market reforms and undertake welfare-oriented redistributive programmes (Islam, 2018). By decentralising power to the poorer sections of the country, democratization may intensify the roll-out of pro-poor policies and therefore decreasing inequality (Acemoglu, Naidu, Restrepo and Robinson, 2015).”
References
Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2015). Democracy, redistribution, and inequality. In Handbook of income distribution (Vol. 2, pp. 1885-1966). Elsevier.
Addo, A. (2021). Controlling petty corruption in public administrations of developing countries through digitalization: An opportunity theory informed study of Ghana customs. The Information Society, 37(2), 99-114.
Basu, S., & Bundick, B. (2017). Uncertainty shocks in a model of effective demand. Econometrica, 85(3), 937-958.
Cheon, A., Urpelainen, J., & Lackner, M. (2013). Why do governments subsidize gasoline consumption? An empirical analysis of global gasoline prices, 2002–2009. Energy Policy, 56, 382-390.
Erickson, P., Down, A., Lazarus, M., & Koplow, D. (2017). Effect of subsidies to fossil fuel companies on United States crude oil production. Nature Energy, 2(11), 891-898.
Gilchrist, S., Sim, J. W., & Zakrajšek, E. (2014). Uncertainty, financial frictions, and investment dynamics (No. w20038). National Bureau of Economic Research, 20038.
Inchauste, G., & Victor, D. G. (Eds.). (2017). The political economy of energy subsidy reform. World Bank Publications.

Islam, M. R. (2018). Wealth inequality, democracy and economic freedom. Journal of Comparative Economics, 46(4), 920-935.
Jouini, N., Lustig, N., Moummi, A., & Shimeles, A. (2018). Fiscal policy, income redistribution, and poverty reduction: Evidence from Tunisia. Review of Income and Wealth, 64, S225-S248.
McCulloch, N., Moerenhout, T., & Yang, J. (2021). Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis. Energy policy, 156, 112336.
Melki, M. (2022). Inequality and investment: The role of institutions. Economic Modelling, 108, 105736.

Fifth, the author(s) discuss the impact of climate change as one mechanism through which FFS impacts inequality (p. 5), but this impact is global rather than national, and hence not relevant to a study of impact of FFS on inequality within a country. Fossil fuel subsidies do lead to more climate change, but this impact falls equally on countries with FFS and without them. There is also a substantial time lag between FFS and the resulting climate impact. I suggest deleting this discussion, and instead elaborating more on how fossil fuel subsidies often justified as poverty alleviation tool (this is the case for the largest FFS in developing countries) mainly benefit the upper and middle classes.
Response
We have removed the following from the literature review:
“Fossil fuels subsidy weakens the efficiency of any climate change mitigation programme (Rentschler and Bazilian, 2017). Economically and socially marginalized and disadvantaged people are disproportionally impacted by climate change (Islam and Winkel, 2012). Aggravation of inequality can occur via disproportionate erosion of social, physical and human assets. Almost 30% of the population in the globe reside in semi-arid, arid and dry sub-humid aridity zones, which are experiencing additional challenges from climate change. There is a greater concentration of marginalized groups of people in these areas (Islam and Winkel, 2012).”

“The marginalized groups are more vulnerable to consequences of climate changes partly due to inadequate diversification of their assets. For example, the urban poor are likely to have their savings in the form of housing stock, which is susceptible to floods. Their situation contrasts with that of the richer households, who have the capacity to diversify their assets, both financially and spatially and are therefore less vulnerable to damages triggered by climate hazards. There are less resources for the marginalized groups to undertake coping and recovery measures (Islam and Winkel, 2012).”

“It has also been argued that subsidies are usually introduced by autocracies for political survival as against uplifting the welfare of the poor in the rural areas. Political survival of an authoritarian government often relies on the support of urban citizens. Therefore, the benefits of low prices flow to the urban constituencies as against low-income earners who mainly reside in rural areas (Kim and Urpelainen, 2016). Once instituted, fossil fuel subsidies are hardly to revert (Mahdavi, Martinez-Alvarez and Ross, 2020).”
Reference
Kim, S. E., & Urpelainen, J. (2016). Democracy, autocracy and the urban bias: Evidence from petroleum subsidies. Political Studies, 64(3), 552-572.
Mahdavi, P., Martinez-Alvarez, C. B., & Ross, M. L. (2020). Why do governments tax or subsidize fossil fuels?. Center for Global Development Working Paper, 541, 1-72.

Sixth, the manuscript requires a substantial amount of polishing. For instance, phrases such as “corruption can make fossil fuel subsidies to worsen oncome inequality” are clunky and difficult to understand.
Response
We have proofread the paper. The phrase is now:
“income inequality”
• Often, the term “fossil fuel subsidy” is used when “fossil fuel subsidies” would be more correct.
Response
“fossil fuel subsidy” has been changed to “fossil fuel subsidies”

• The discussion of the relationship between growth and inequality appears on p. 16 appears less relevant and under-developed, and should be left out.
Response
We have removed the following:
“The empirical findings also suggest that economic growth depresses income inequality, which implies that economic expansion is a viable tool for income distribution. The empirical results are consistent with the results of Law et al. (2020). There are numerous justifications for such empirical findings. First, economic growth facilitates investment in new skills and technologies, which can generate improved income distribution. Economic growth could possibly create employment opportunities for the poor households and lead to the reduction of the wage gaps between skilled and unskilled labour (Perera and Lee, 2013).”

• Also on p. 16, the sentences “The results suggest that uncertainty [corruption] promotes income inequality and increases the effect of fossil fuels subsidy.” should be revised to “The results suggest that uncertainty [corruption] promotes income inequality and increases the effect of fossil fuels subsidy on inequality.”
Response
Originality: Does the paper contain new and significant information adequate to justify publication?: Yes, although I am not sure how substantial their contribution is considering that Couharde & Mouhoud (2020) appear to have published on the same topic. The authors should specify their contribution vis-a-vis this paper.
Response
“The difference between the current study and that of Couharde and Mouhoud (2020) is that while the current study has used econometrics tools in the methodology, the latter has used descriptive statistics to analyse the relationship between fossil fuel subsidies and income inequality.”
Reference
Couharde, C., & Mouhoud, S. (2020). Fossil fuel subsidies, income inequality, and poverty: Evidence from developing countries. Journal of Economic Surveys, 34(5), 981-1006.

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: Generally, yes, although more references to academic literature could be added. In the comments to the authors, I also mention different political economy publications that may be useful to refer to.
Response
We have added the following in the literature review:

“There are also cost of subsidies beyond the fiscal cost of subsidies. The cost of negative externalities triggered by fossil fuels and such subsidies include road damage, accidents and congestion (McCulloch, Moerenhout and Yang, 2021).”
“Fossil fuel subsidies frequently follow a life cycle. Subsidies typically start as price stabilization policies principally intended to decrease exposure of low-income consumers to price volatility (Inchauste and Victor, 2017). Eventually, the majority of the subsidies favour special interests (to the extent that the well-organized these groups can exercise leverage on the government) but not the poor in the society (Inchauste and Victor, 2017).”

“Fossil fuel subsidies shift consumption towards energy products and away from products whose price reflects market conditions (Inchauste and Victor, 2017).”
“Authorities usually introduce fossil fuel subsidies to facilitate energy availability and access (Erickson, Down, Lazarus and Koplow, 2017).”
“Some countries, especially the developing ones do not have sufficient institutional capacity to efficiently redistribute wealth. Hence, fossil fuel subsidies can serve as viable channels through which wealth can be redistributed in countries that lack institutional capacities to reallocate wealth through other channels (Cheon, Urpelainen and Lackner, 2013).”
“Corruption is prevalent in the public sectors of several developing countries (Addo, 2021). Since public sectors are frequently required to administer fossil fuel subsidies in the developing countries, fossil fuel subsidies will not be properly allocated. Hence, corruption is likely to lead to greater fossil fuel subsidies in the developing countries. Corruption negatively affects the institutional capacity of political authorities to provide relevant public services, decreases economic growth and subsequently increase income inequality (Melki, 2022).”
“Uncertainty affects the redistributive power of fiscal policies in the developing countries (Jouini, Lustig, Moummi and Shimeles, 2018). Hence, more fossil fuel subsidies are needed for impact of subsidies to be felt in the developing countries. Increasing uncertainty forces households to be more precautionary in their spending (Basu and Bundick, 2017) and exacerbates financing costs of firms (Gilchrist, Sim and Zakrajšek, 2014). Decrease in consumer spending couple with increasing financing costs of firms lead to a decrease in economic growth and increase in income inequality.”
“Another possible determinant of income inequality is democratization. This is because democratization leads to more economic opportunities for the low-income section of the country and thus plummeting income inequality. It also assists nations to implement favourable market reforms and undertake welfare-oriented redistributive programmes (Islam, 2018). By decentralising power to the poorer sections of the country, democratization may intensify the roll-out of pro-poor policies and therefore decreasing inequality (Acemoglu, Naidu, Restrepo and Robinson, 2015).”
References
Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2015). Democracy, redistribution, and inequality. In Handbook of income distribution (Vol. 2, pp. 1885-1966). Elsevier.
Addo, A. (2021). Controlling petty corruption in public administrations of developing countries through digitalization: An opportunity theory informed study of Ghana customs. The Information Society, 37(2), 99-114.
Basu, S., & Bundick, B. (2017). Uncertainty shocks in a model of effective demand. Econometrica, 85(3), 937-958.
Cheon, A., Urpelainen, J., & Lackner, M. (2013). Why do governments subsidize gasoline consumption? An empirical analysis of global gasoline prices, 2002–2009. Energy Policy, 56, 382-390.
Erickson, P., Down, A., Lazarus, M., & Koplow, D. (2017). Effect of subsidies to fossil fuel companies on United States crude oil production. Nature Energy, 2(11), 891-898.
Gilchrist, S., Sim, J. W., & Zakrajšek, E. (2014). Uncertainty, financial frictions, and investment dynamics (No. w20038). National Bureau of Economic Research, 20038.
Inchauste, G., & Victor, D. G. (Eds.). (2017). The political economy of energy subsidy reform. World Bank Publications.

Islam, M. R. (2018). Wealth inequality, democracy and economic freedom. Journal of Comparative Economics, 46(4), 920-935.
Jouini, N., Lustig, N., Moummi, A., & Shimeles, A. (2018). Fiscal policy, income redistribution, and poverty reduction: Evidence from Tunisia. Review of Income and Wealth, 64, S225-S248.
McCulloch, N., Moerenhout, T., & Yang, J. (2021). Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis. Energy policy, 156, 112336.
Melki, M. (2022). Inequality and investment: The role of institutions. Economic Modelling, 108, 105736.

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: It appears so, but I'm hardly an expert on quantitative methods. See also my comment to the authors about the IEA data.
Response
“The reason for using the subsidies of International Energy Agency Database is because it focusses solely consumption subsidies. This dataset also differs from subsidies data of the International Monetary Fund, which is based on the method of including the non-pricing of externalities.”
Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: Yes, they do. This is a strength of the paper.
Response
Thank you
Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: It does identify such implications. I'm not sure how straightforward it will be to reduce corruption, see also the discussion in the comments to the authors regarding whether FFS and income inequality may be driven by the same factors.
Response
Thank you
Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: They get the message across, but the language is sometimes clunky and needs proof-reading.
Response
Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?
Response
Thank you

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Response
Thank you

##### Cite this author response
• pre-publication peer review (ROUND 1)
##### Decision Letter
2022/01/05

05-Jan-2022

Dear Dr. Solarin:

Manuscript ID IJSE-11-2021-0675 entitled "The impact of fossil fuels subsidy on income inequality: accounting for the interactive roles of corruption and economic uncertainty" which you submitted to the International Journal of Social Economics, has been reviewed. The comments of the reviewers are included at the bottom of this letter.

The reviewer(s) have recommended major revisions to the submitted manuscript, before it can be considered for publication. Therefore, I invite you to respond to the reviewer(s)' comments and revise your manuscript.

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Once again, thank you for submitting your manuscript to the International Journal of Social Economics and I look forward to receiving your revision.

Sincerely,
Dr. Stefan Mann
Editor, International Journal of Social Economics

Reviewer: 1

Recommendation: Accept

Originality: Does the paper contain new and significant information adequate to justify publication?: yes

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: there is no empirical literature review done.

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: yes

Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: Table 1 has no explanation. there are no diagnostics tests, ( unit root etc) , post estimation tests to be clearly presented

Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: fairly done , but not properly presented. it requires polishing.

Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: work require language editing. there is no flow on some paragraphs but author(s) have tried.

Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?: yes it is appropriate, but some missing information must be supplied. see commented document

This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: Yes, I would like my name to appear with my report on Publons

Reviewer: 2

Recommendation: Major Revision

Dear Editor.
I hereby submit the review report of manuscript IJSE-11-2021-0675 titled: The impact of fossil fuels subsidy on income inequality: accounting for the interactive roles of corruption and economic uncertainty. I wish to commend the authors of this article for doing a great job. Below are my comments to the author and I hope it is useful to such purpose.
1. The authors argument in page 4, line 19-23 that it has been contended that fossil fuels subsidy causes distortions, which aggravate inequality because wealthier households are likely to benefit more from subsidies in most developing countries, skewing the current income distribution is unclear. What are those distortions caused by fossil fuels subsidy. This will be very difficult for most readers to understand.
2. The author’s choice of the 31 selected developing countries being that there are available datasets for income inequality, GDP per capita, fossil fuels subsidy, corruption and uncertainty index for them is quite weak not enough justification. Author may perhaps consider leveraging on other choices like being the highest in terms of income inequality and fossil fuel subsidies.
3. Author should provide a reference in page 9, line 35 which states that estimates provide a nation's score that is oscillating from -2.5 to 2.5.
4. Author did not provide enough justification for using the GMM approach.
5. The results show that the interaction term between fossil fuels subsidy and corruption is negative and significant, which implies that an increase in corruption will increase the impact of fossil fuels subsidy on income inequality. The above statement is incorrect as a negative relationship implies that when one variable is increasing, the other will be decreasing. Author should relook into the above result.

Originality: Does the paper contain new and significant information adequate to justify publication?: Yes

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: Not really

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: Yes

Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: Yes it did

Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: Yes implications are consistent with the findings.

Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: Manuscript needs professional editing as there are few grammatical errors.

Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?: Yes

This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: No, I would not like my name to appear with my report on Publons

Reviewer: 3

Recommendation: Major Revision

The topic that this paper seeks to address is topical and relevant, namely the impact of fossil fuel subsidies (FFS) on income inequality, taking into account corruption and uncertainty. The author(s) are familiar with the most relevant discussions regarding FFS as well as income inequality, although I am not an expert on the latter topic. The methods appear sound, again with the caveat that I am not an expert on quantitative methods.

However, the paper also suffers from important shortcomings, which should be addressed before the manuscript can be considered for publication.

First, I think the causal model should be further elaborated or at least explained better. As the author(s) argue, FFS may impact income inequality. Yet, it is also possible to imagine the reverse causal relationship: that countries with high levels of income inequality adopt higher levels of fossil fuel subsidies as an instrument to address this inequality. Furthermore, several factors may impact FFS levels as well as income inequality. Corruption and uncertainty are two such factors, governance capacity – highly correlated with corruption but not reduceable to it – (Commander, 2012; Cheon et al., 2013), as well as levels of democracy (Overland, 2010; Kim and Urpelainen, 2015) constitute other examples. I would recommend that the authors discuss these causal relations in more detail, including how the corruption and uncertainty may influence both FFS and inequality, and include more variables in their model (particularly fossil fuel reserves, governance, democracy)

Second, while the discussion of corruption is straightforward, what uncertainty exactly refers to and why it is operationalized using the Economist Intelligence Unit requires more elaboration. To me, how frequently uncertainty is used in reference to a country seems like a somewhat imprecise measure of uncertainty, and other ways of operationalizing uncertainty should be considered. In order to properly assess whether this is an adequate measure of uncertainty, it is first necessary that the author(s) clarify exactly what the term refers to.

Third, in terms of data, I wonder why the author(s) use the IEA price-gap data rather than the data in the Fossil Fuel Subsidy Tracker. The latter two databases are more comprehensive in terms of including subsidies that do not lower fossil fuel prices below the bench mark price, especially production subsidies and tax rebates. If the author(s) decide to stick to the IEA data, they should at least justify this choice and clarify that this entails focusing on solely consumption subsidies. Such justification should also refer to the IMF’s method of including the non-pricing of externalities. Furthermore, statements such as “The fossil fuel subsidy is aimed at protecting local industries…”, apply mainly to subsidies not captured by the price-gap approach, and should be revised

Fourth, more references to academic publications should be added, and more effort should be made to place contribution of the manuscript to the academic literature. For instance, I would like to know more about how their contribution goes beyond Couharde & Mouhoud (2020). Furthermore, a lot of the references are to publications by International Organizations (e.g. IMF, UNDP), and these should be supplemented by references to academic publications. In this respect, political economy publications such as Cheon et al., 2013; Mahdavi et al 2020; Kim and Urpelainen, 2015; Inchauste and Victor 2017; Erickson et al 2017; McCulloch et al 2021 could also be useful.

Fifth, the author(s) discuss the impact of climate change as one mechanism through which FFS impacts inequality (p. 5), but this impact is global rather than national, and hence not relevant to a study of impact of FFS on inequality within a country. Fossil fuel subsidies do lead to more climate change, but this impact falls equally on countries with FFS and without them. There is also a substantial time lag between FFS and the resulting climate impact. I suggest deleting this discussion, and instead elaborating more on how fossil fuel subsidies often justified as poverty alleviation tool (this is the case for the largest FFS in developing countries) mainly benefit the upper and middle classes.

Sixth, the manuscript requires a substantial amount of polishing. For instance, phrases such as “corruption can make fossil fuel subsidies to worsen oncome inequality” are clunky and difficult to understand.

• Often, the term “fossil fuel subsidy” is used when “fossil fuel subsidies” would be more correct.
• The discussion of the relationship between growth and inequality appears on p. 16 appears less relevant and under-developed, and should be left out.
• Also on p. 16, the sentences “The results suggest that uncertainty [corruption] promotes income inequality and increases the effect of fossil fuels subsidy.” should be revised to “The results suggest that uncertainty [corruption] promotes income inequality and increases the effect of fossil fuels subsidy on inequality.”

Originality: Does the paper contain new and significant information adequate to justify publication?: Yes, although I am not sure how substantial their contribution is considering that Couharde & Mouhoud (2020) appear to have published on the same topic. The authors should specify their contribution vis-a-vis this paper.

Relationship to Literature: Does the paper demonstrate an adequate understanding of the relevant literature in the field and cite an appropriate range of literature sources? Is any significant work ignored?: Generally, yes, although more references to academic literature could be added. In the comments to the authors, I also mention different political economy publications that may be useful to refer to.

Methodology: Is the paper's argument built on an appropriate base of theory, concepts, or other ideas? Has the research or equivalent intellectual work on which the paper is based been well designed? Are the methods employed appropriate?: It appears so, but I'm hardly an expert on quantitative methods. See also my comment to the authors about the IEA data.

Results: Are results presented clearly and analysed appropriately? Do the conclusions adequately tie together the other elements of the paper?: Yes, they do. This is a strength of the paper.

Implications for research, practice and/or society: Does the paper identify clearly any implications for research, practice and/or society? Does the paper bridge the gap between theory and practice? How can the research be used in practice (economic and commercial impact), in teaching, to influence public policy, in research (contributing to the body of knowledge)? What is the impact upon society (influencing public attitudes, affecting quality of life)? Are these implications consistent with the findings and conclusions of the paper?: It does identify such implications. I'm not sure how straightforward it will be to reduce corruption, see also the discussion in the comments to the authors regarding whether FFS and income inequality may be driven by the same factors.

Quality of Communication: Does the paper clearly express its case, measured against the technical language of the field and the expected knowledge of the journal's readership? Has attention been paid to the clarity of expression and readability, such as sentence structure, jargon use, acronyms, etc.: They get the message across, but the language is sometimes clunky and needs proof-reading.

Reproducible Research: If appropriate, is sufficient information, potentially including data and software, provided to reproduce the results and are the corresponding datasets formally cited?:

This journal is participating in Publons Transparent Peer Review. By reviewing for this journal, you agree that your finished report, along with the author’s responses and the Editor’s decision letter, will be linked to from the published article to where they appear on Publons, if the paper is accepted. If you have any concerns about participating in the Transparent Peer Review pilot, please reach out to the journal’s Editorial office. Please indicate below, whether you would like your name to appear with your report on Publons by indicating yes or no. All peer review content displayed here will be covered by a Creative Commons CC BY 4.0 license.: Yes, I would like my name to appear with my report on Publons

##### Reviewer report
2022/01/04

The topic that this paper seeks to address is topical and relevant, namely the impact of fossil fuel subsidies (FFS) on income inequality, taking into account corruption and uncertainty. The author(s) are familiar with the most relevant discussions regarding FFS as well as income inequality, although I am not an expert on the latter topic. The methods appear sound, again with the caveat that I am not an expert on quantitative methods.

However, the paper also suffers from important shortcomings, which should be addressed before the manuscript can be considered for publication.

First, I think the causal model should be further elaborated or at least explained better. As the author(s) argue, FFS may impact income inequality. Yet, it is also possible to imagine the reverse causal relationship: that countries with high levels of income inequality adopt higher levels of fossil fuel subsidies as an instrument to address this inequality. Furthermore, several factors may impact FFS levels as well as income inequality. Corruption and uncertainty are two such factors, governance capacity – highly correlated with corruption but not reduceable to it – (Commander, 2012; Cheon et al., 2013), as well as levels of democracy (Overland, 2010; Kim and Urpelainen, 2015) constitute other examples. I would recommend that the authors discuss these causal relations in more detail, including how the corruption and uncertainty may influence both FFS and inequality, and include more variables in their model (particularly fossil fuel reserves, governance, democracy)

Second, while the discussion of corruption is straightforward, what uncertainty exactly refers to and why it is operationalized using the Economist Intelligence Unit requires more elaboration. To me, how frequently uncertainty is used in reference to a country seems like a somewhat imprecise measure of uncertainty, and other ways of operationalizing uncertainty should be considered. In order to properly assess whether this is an adequate measure of uncertainty, it is first necessary that the author(s) clarify exactly what the term refers to.

Third, in terms of data, I wonder why the author(s) use the IEA price-gap data rather than the data in the Fossil Fuel Subsidy Tracker. The latter two databases are more comprehensive in terms of including subsidies that do not lower fossil fuel prices below the bench mark price, especially production subsidies and tax rebates. If the author(s) decide to stick to the IEA data, they should at least justify this choice and clarify that this entails focusing on solely consumption subsidies. Such justification should also refer to the IMF’s method of including the non-pricing of externalities. Furthermore, statements such as “The fossil fuel subsidy is aimed at protecting local industries…”, apply mainly to subsidies not captured by the price-gap approach, and should be revised

Fourth, more references to academic publications should be added, and more effort should be made to place contribution of the manuscript to the academic literature. For instance, I would like to know more about how their contribution goes beyond Couharde & Mouhoud (2020). Furthermore, a lot of the references are to publications by International Organizations (e.g. IMF, UNDP), and these should be supplemented by references to academic publications. In this respect, political economy publications such as Cheon et al., 2013; Mahdavi et al 2020; Kim and Urpelainen, 2015; Inchauste and Victor 2017; Erickson et al 2017; McCulloch et al 2021 could also be useful.

Fifth, the author(s) discuss the impact of climate change as one mechanism through which FFS impacts inequality (p. 5), but this impact is global rather than national, and hence not relevant to a study of impact of FFS on inequality within a country. Fossil fuel subsidies do lead to more climate change, but this impact falls equally on countries with FFS and without them. There is also a substantial time lag between FFS and the resulting climate impact. I suggest deleting this discussion, and instead elaborating more on how fossil fuel subsidies often justified as poverty alleviation tool (this is the case for the largest FFS in developing countries) mainly benefit the upper and middle classes.

Sixth, the manuscript requires a substantial amount of polishing. For instance, phrases such as “corruption can make fossil fuel subsidies to worsen oncome inequality” are clunky and difficult to understand.

• Often, the term “fossil fuel subsidy” is used when “fossil fuel subsidies” would be more correct.
• The discussion of the relationship between growth and inequality appears on p. 16 appears less relevant and under-developed, and should be left out.
• Also on p. 16, the sentences “The results suggest that uncertainty [corruption] promotes income inequality and increases the effect of fossil fuels subsidy.” should be revised to “The results suggest that uncertainty [corruption] promotes income inequality and increases the effect of fossil fuels subsidy on inequality.”

##### Reviewer report
2021/12/23

Dear Editor.
I hereby submit the review report of manuscript IJSE-11-2021-0675 titled: The impact of fossil fuels subsidy on income inequality: accounting for the interactive roles of corruption and economic uncertainty. I wish to commend the authors of this article for doing a great job. Below are my comments to the author and I hope it is useful to such purpose.
1. The authors argument in page 4, line 19-23 that it has been contended that fossil fuels subsidy causes distortions, which aggravate inequality because wealthier households are likely to benefit more from subsidies in most developing countries, skewing the current income distribution is unclear. What are those distortions caused by fossil fuels subsidy. This will be very difficult for most readers to understand.
2. The author’s choice of the 31 selected developing countries being that there are available datasets for income inequality, GDP per capita, fossil fuels subsidy, corruption and uncertainty index for them is quite weak not enough justification. Author may perhaps consider leveraging on other choices like being the highest in terms of income inequality and fossil fuel subsidies.
3. Author should provide a reference in page 9, line 35 which states that estimates provide a nation's score that is oscillating from -2.5 to 2.5.
4. Author did not provide enough justification for using the GMM approach.
5. The results show that the interaction term between fossil fuels subsidy and corruption is negative and significant, which implies that an increase in corruption will increase the impact of fossil fuels subsidy on income inequality. The above statement is incorrect as a negative relationship implies that when one variable is increasing, the other will be decreasing. Author should relook into the above result.

2021/11/30