Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Economy-wide Impact of Better Governance: Cutting Informal Taxes in Indonesia


Author Info

  • Edimon Ginting
  • Alan A. Powell


In some developing economies the costs of meeting informal taxes (corruption of various sorts) have been put as high as 30 percent of the market value of output in some industries. Current political reform in Indonesia raises the prospect of a substantial fall in such costs. To assess the consequences for Indonesia's international competitiveness and national welfare requires the development and use of an applied general equilibrium model which explicitly recognises the existence of non-official imposts and the substantial (but socially wasteful) economic activity expended in attempting to reduce them. ORANI-RSA is such a model, recently developed for this purpose. In short- and long-run simulations the nominal rate at which informal taxes are levied is halved and the response of the economy determined. Not unexpectedly, competitiveness and the trade account improve substantially (with a 2 percent short-run fall in the real foreign-currency cost of the Rupiah). Indonesian welfare also improves. The only industry to decline is the service providing sector (corresponding roughly to the bureaucrats who supply intermediation between legitimate producers and the corrupt members of the power elite). The reform causes a fall in income from corruption, while redistributive effects via differential consumption patterns reinforce the improvement in the trade balance.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
File Function: Initial version, 1998-04
Download Restriction: no

File URL:
File Function: Local abstract: may link to additional material.
Download Restriction: no

Bibliographic Info

Paper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number op-92.

as in new window
Date of creation: Apr 1998
Date of revision:
Handle: RePEc:cop:wpaper:op-92

Contact details of provider:
Postal: PO Box 14428, Melbourne, Victoria, 8001
Phone: 03 9919 1877
Web page:
More information through EDIRC

Related research


Find related papers by JEL classification:


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.:
as in new window
  1. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, American Economic Association, vol. 64(3), pages 291-303, June.
  2. Bhagwati, Jagdish N. & Brecher, Richard A. & Srinivasan, T. N., 1984. "DUP activities and economic theory," European Economic Review, Elsevier, Elsevier, vol. 24(3), pages 291-307, April.
  3. Mark Horridge, 2000. "ORANI-G: A General Equilibrium Model of the Australian Economy," Centre of Policy Studies/IMPACT Centre Working Papers, Victoria University, Centre of Policy Studies/IMPACT Centre op-93, Victoria University, Centre of Policy Studies/IMPACT Centre.
  4. Higgs, Peter J. & Powell, Alan A., 1992. "Australia's North-West shelf gas project : A general equilibrium analysis of its impact on the Australian economy," Resources Policy, Elsevier, Elsevier, vol. 18(3), pages 179-190, September.
Full references (including those not matched with items on IDEAS)


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Edimon Ginting, 1999. "Tax Evasion in a Corrupt Economy," Centre of Policy Studies/IMPACT Centre Working Papers, Victoria University, Centre of Policy Studies/IMPACT Centre g-133, Victoria University, Centre of Policy Studies/IMPACT Centre.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:cop:wpaper:op-92. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Horridge).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.