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Household’s Welfare Impact of Fuel Subsidy Removal

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  • Widodo, Tri

Abstract

This paper aims to analyze the energy subsidy removal on the households’ welfare in Indonesia. First, we will model theoretically the welfare change measurement. In this paper, we will apply Compensating Variation (CV) and Equivalent Variation (EV) under Linear Expenditure System (LES). Second, we will estimate empirically the model by using National Social Economic Survey (Survei Sosial Ekonomi Nasional, SUSENAS) and Cost of Living Survey (Survei Biaya Hidup) data. Third, by using the estimated CV and EV, we will simulate the impacts of the energy subsidy removal on the households’ welfare. The CV and EV can be considered as the compensation should be given to the poor households.

Suggested Citation

  • Widodo, Tri, 2012. "Household’s Welfare Impact of Fuel Subsidy Removal," MPRA Paper 77997, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:77997
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    File URL: https://mpra.ub.uni-muenchen.de/77997/1/MPRA_paper_77997.pdf
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    References listed on IDEAS

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    1. Deaton, Angus, 1986. "Demand analysis," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 30, pages 1767-1839, Elsevier.
    2. R. C. Geary, 1950. "A Note on "A Constant-Utility Index of the Cost of Living"," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 18(1), pages 65-66.
    3. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
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    Cited by:

    1. Ghoddusi, Hamed & Morovati, Mohammad & Rafizadeh, Nima, 2022. "Dynamics of fuel demand elasticity: Evidence from Iranian subsidy reforms," Energy Economics, Elsevier, vol. 110(C).
    2. Bekithemba Qeqe & Forget Kapingura & Bahle Mgxekwa, 2022. "The Relationship between Electricity Prices and Household Welfare in South Africa," Energies, MDPI, vol. 15(20), pages 1-15, October.

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    More about this item

    Keywords

    Welfare Measurement; Compensating Variation (CV) and Equivalent Variation (EV); Linear Expenditure System (LES);
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D6 - Microeconomics - - Welfare Economics

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