calculated and for potential explanatory variables we calculated the mean values for the period 1991- 2005.<sup>12</sup> Fossil fuel subsidies were calculated by the price gap method, which implies calculating the difference between a benchmark and the actual fossil fuel prices paid at the pump. Our benchmark is the average fuel pump price in the United States in US$ cents per liter. For oil importing countries this price is reduced by US$ 0.10 per liter to allow for the costs of shipping the fuel from the hub to the country. Then we use this price as the benchmark price and subtract the domestic gasoline (or diesel) prices in order to get the gasoline (or diesel) subsidy rate. For the oil exporting countries the benchmark dollar price is defined as the fuel pump price in the United States minus US$0.10 per liter to allow for cost of shipping the fuel from the hub to the country and an additional US$ 0.10 per liter to remove the internal distribution and retailing costs in the domestic market of the oil exporter. These price gaps are identified as subsidies per liter of gasoline or diesel in US dollar cents and defined as:<sup>13</sup> _PG_<sup>_imp_</sup> _= P_<sup>_usa_</sup> _– P_<sup>_dom_</sup> _– 10_ for importing countries, _PG_<sup>_exp_</sup> _= P_<sup>_usa_</sup> _– P_<sup>_dom_</sup> _– 20_ for exporting countries where _PG_<sup>_imp_</sup> is the price gap for net energy importing countries, _PG_<sup>_exp_</sup> is the price gap for net energy exporting countries, _P_<sup>_hub_</sup> is the price of a unit of energy at the nearest international hub, and _P_<sup>_dom_</sup> is the retail pump price of a unit of energy in the domestic market.

With regard to the relationship between fossil fuel subsidies and public goods provision variables we examine the relationship between diesel- and premium gasoline subsidies and the public goods provisions as expressed by _central government public health expenditures as a percentage of GDP_ .<sup>14</sup> Figures 1 – 4 show relationships between central government health expenditures as average share of GDP for the 1991 – 2005 period, and subsidies to diesel and premium gasoline in 2006 – 2009 respectively, separately for democratic and non-democratic governments. The democratic/non-democratic distinction is identified by two variables related to “legislative and executive political competition” in the DPI dataset (see Appendix B). Both, Legislative Index of Electoral Competition ( _LIEC_ ) and the Executive Index of Electoral Competition ( _EIEC_ ), range from 1 (no legislature, no elections) to 7 (elections with largest party or executive gets less than 75 % of the votes). A country is considered democratic if both LIEC and EIEC take the value 7; otherwise it is considered a non-democracy.

> 12 The difference between periods for dependent and independent variables comes from cross-section estimates that are not reported here for reasons of space.

> 13 We also calculated subsidies with the method as used by Coady et.al (2010) who uses the international hub dollar prices as the benchmark and found hardly differences in the ranking of countries with regard to their subsidy rate as reported in Figures 1 – 4 below. We prefer the benchmark price as described in the main text to escape the limited availability of the relevant hub prices. 14 In many low-income countries regular gasoline is consumed more than premium gasoline. However, the number of observations for regular gasoline prices is substantially less than for premium gasoline prices. As in equation (1) the focus is on price levels and not on subsidy levels, and a positive correlation between the prices of both kinds of gasoline exists, we expect premium prices to be a good substitute.

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