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Searching for Equitable Energy Pricing Reform for Indonesia

Listed author(s):
  • Arief Anshory Yusuf

    ()

    (Department of Economics, Padjadjaran University)

  • Budy P. Resosudarmo

    ()

    (Australian National University)

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.

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File URL: http://ceds.feb.unpad.ac.id/wopeds/200701.pdf
File Function: First version, 2007
Download Restriction: no

Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 200701.

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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
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Jalan Cimandiri No.6, Bandung 40115

Phone: (062)022-4204510
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Web page: http://ceds.fe.unpad.ac.id
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  1. Peter Warr, 2006. "The Gregory Thesis Visits the Tropics," The Economic Record, The Economic Society of Australia, vol. 82(257), pages 177-194, 06.
  2. Arief Anshory Yusuf, 2006. "Constructing Indonesian Social Accounting Matrix for Distributional Analysis in the CGE Modelling Framework," Working Papers in Economics and Development Studies (WoPEDS) 200604, Department of Economics, Padjadjaran University, revised Nov 2006.
  3. Chris Manning & Kurnya Roesad, 2006. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(2), pages 143-170.
  4. M. Chatib Basri & Arianto Patunru, 2006. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(3), pages 295-319.
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