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Easing the traffic: The effects of Indonesia’s fuel subsidy reforms on toll-road travel

Author

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  • Burke, Paul J.
  • Batsuuri, Tsendsuren
  • Yudhistira, Muhammad Halley

Abstract

Indonesia has serious traffic jams. This study uses data from 19 Indonesian toll roads over 2008–2015 to calculate the effects of Indonesia’s historic recent fuel subsidy reforms on motor vehicle travel. The timing of the reforms was determined by budgetary and political factors, providing a suitable setting for estimating a causal effect. We control for a broad set of other factors potentially influencing traffic flows. Estimates using monthly data suggest an immediate fuel price elasticity of motor vehicle flows on the roads in our study of –0.1, increasing to –0.2 when responses over ayear are considered. We estimate that Indonesia’s fuel subsidy reforms of 2013 and 2014 had reduced traffic pressure on these roads in the second half of 2015 by around 10% relative to the counterfactual without reform. A move to an adequate fuel excise system could contribute to more free-flowing traffic, while generating revenue for infrastructure and other investment.

Suggested Citation

  • Burke, Paul J. & Batsuuri, Tsendsuren & Yudhistira, Muhammad Halley, 2017. "Easing the traffic: The effects of Indonesia’s fuel subsidy reforms on toll-road travel," Transportation Research Part A: Policy and Practice, Elsevier, vol. 105(C), pages 167-180.
    • Handle: RePEc:eee:transa:v:105:y:2017:i:c:p:167-180
    DOI: 10.1016/j.tra.2017.08.003
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    Cited by:

    1. Burke, Paul J. & Kurniawati, Sandra, 2018. "Electricity subsidy reform in Indonesia: Demand-side effects on electricity use," Energy Policy, Elsevier, vol. 116(C), pages 410-421.
    2. Muhammad Halley Yudhistira & Prani Sastiono & Melly Meliyawati, 2018. "Estimating Urban Water Demand Elasticities using Regression Discontinuity: A Case of Tangerang Regency, Indonesia," LPEM FEBUI Working Papers 201818, LPEM, Faculty of Economics and Business, University of Indonesia, revised Mar 2018.
    3. Willem Thorbecke, 2021. "The weak rupiah: catching the tailwinds and avoiding the shoals," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 23(3), pages 521-539, December.
    4. Ahmed, Kashif & Kamihigashi, Takashi & Matsuo, Miwa, 2023. "Positive fuel price elasticities of expressway traffic flows: Insights for policymakers and management strategists," Transport Policy, Elsevier, vol. 142(C), pages 99-114.
    5. Isti Hidayati & Claudia Yamu & Wendy Tan, 2019. "The Emergence of Mobility Inequality in Greater Jakarta, Indonesia: A Socio-Spatial Analysis of Path Dependencies in Transport–Land Use Policies," Sustainability, MDPI, vol. 11(18), pages 1-18, September.
    6. Zhang, Tong & Burke, Paul J., 2020. "The effect of fuel prices on traffic flows: Evidence from New South Wales," Transportation Research Part A: Policy and Practice, Elsevier, vol. 141(C), pages 502-522.
    7. Muhammad Halley Yudhistira & Yusuf Sofiyandi & Witri Indriyani & Andhika Putra Pratama, 2021. "Heterogeneous effects of visa exemption policy on international tourist arrivals: Evidence from Indonesia," Tourism Economics, , vol. 27(4), pages 703-720, June.
    8. Thorbecke, Willem, 2019. "How oil prices affect East and Southeast Asian economies: Evidence from financial markets and implications for energy security," Energy Policy, Elsevier, vol. 128(C), pages 628-638.

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    Keywords

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    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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