In 2005, the Indonesian government implemented a massive fuel price increase. While the benefits of the reform on efficiency grounds have been widely acknowledged, there is still debate about whether the reform was equitable.., That question is answered in this paper using a Computable General Equilibrium (CGE) model with disaggregated households that allows for a rich and accurate distributional story. Analysis of various counter-factual scenarios analysis of the reform is carried out. It suggests that the reform could have been progressive if it increased only vehicle fuel prices. However, it tends to increase inequality especially in urban area when the price of domestic fuel (kerosene) is also increased. Proper and effective compensation is important in mitigating the distributional cost or poverty impact of the reform. A uniform cash transfer to poor households that disregards poor households’ heterogeneity tends to over-compensate the rural poor but under-compensate the urban poor.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Length: 17 pages Date of creation: Jan 2007 Date of revision:
Dec 2007 Publication status: Forthcoming in ASEAN Economic Bulletin, April, 2008 Handle: RePEc:unp:wpaper:200701
Find related papers by JEL classification: D30 - Microeconomics - - Distribution - - - General D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
This paper has been announced in the following NEP Reports:
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.:
Did you know? You can import bibliographic info in various formats into you bibliographic tool, or just into your word processor. See under "publisher info" on each abstract page.