The proper design of price interventions in energy markets requires consideration of equity and efficiency effects. In this paper, budget survey data from 29,000 Indonesian households are used to estimate a demand system for five energy sources, which is identified by the spatial variation in unit values (expenditures divided by quantities). We correct for the various quality and measurement error biases that result when unit values are used as proxies for market prices. The price elasticities are combined with tax and subsidy rates to calculate the marginal social cost of price changes for each item. The results suggest that even with high levels of inequality aversion there is a case for reducing the large subsidies on kerosene in Indonesia, supporting the reforms that have been announced recently.
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Article provided by International Association for Energy Economics in its journal The Energy Journal.
Find related papers by JEL classification: F0 - International Economics - - General
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
John Creedy, 1996.
"Measuring Income Inequality,"
Australian Economic Review,
The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(2), pages 236-246.
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