Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia
AbstractThe proper design of price interventions 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 at high levels of inequality aversion there is a strong case for reducing the large subsidies on gasoline and kerosene, supporting the reforms that have been carried out recently.
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Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25745.
Date of creation: 2006
Date of revision:
Demand elasticities; Energy; Fuels; Subsidies; Unit Values; Resource /Energy Economics and Policy; D12; Q31;
Other versions of this item:
- Susan Olivia & John Gibson, 2008. "Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 21-40.
- Susan Olivia & John Gibson, 2006. "Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia," Working Papers in Economics 06/06, University of Waikato, Department of Economics.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
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