Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia
The proper design of price interventions in energy markets requires consideration of equity and efficiency effects. In this paper, budget survey data from 29,000 Indonesian households are used to estimate a demand system for five energy sources, which is identified by the spatial variation in unit values (expenditures divided by quantities). We correct for the various quality and measurement error biases that result when unit values are used as proxies for market prices. The price elasticities are combined with tax and subsidy rates to calculate the marginal social cost of price changes for each item. The results suggest that even with high levels of inequality aversion there is a case for reducing the large subsidies on kerosene in Indonesia, supporting the reforms that have been announced recently.
|Date of creation:||01 Aug 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Private Bag 3105, Hamilton, New Zealand, 3240|
Phone: + 64 (0)7 838 4758 (Administrator)
Fax: + 64 7 838 4331
Web page: http://cms.mngt.waikato.ac.nz/departments/economics
More information through EDIRC
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.:
- John Creedy, 1996. "Measuring Income Inequality," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(2), pages 236-246.
- Deaton, A., 1988.
"Price Elasticities From Survey Data: Extensions And Indonesian Results,"
138, Princeton, Woodrow Wilson School - Development Studies.
- Deaton, Angus, 1990. "Price elasticities from survey data : Extensions and Indonesian results," Journal of Econometrics, Elsevier, vol. 44(3), pages 281-309, June.
- Deaton, A., 1990. "Price Elasticities From Surveys Data: Extensions And Indonesian Results," Papers 69, World Bank - Living Standards Measurement.
- Pitt, Mark M., 1985. "Equity, externalities and energy subsidies The case of kerosine in Indonesia," Journal of Development Economics, Elsevier, vol. 17(3), pages 201-217, April.
- Deaton, A., 1988.
"Quality, Quantity, And Spatial Variation Of Price,"
30, World Bank - Living Standards Measurement.
- Ahmad, Ehtisham & Stern, Nicholas, 1984. "The theory of reform and indian indirect taxes," Journal of Public Economics, Elsevier, vol. 25(3), pages 259-298, December.
- Kunal Sen & Liesbet Steer, 2005. "Survey of recent developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(3), pages 279-304.
- David M. Newbery, 2005. "Why Tax Energy? Towards a More Rational Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-40.
- Nicita, Alessandro, 2004. "Efficiency and equity of a marginal tax reform - income, quality, and price elasticities for Mexico," Policy Research Working Paper Series 3266, The World Bank.
- Madden, David, 1996. "Marginal Tax Reform and the Specification of Consumer Demand Systems," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 556-67, October.
When requesting a correction, please mention this item's handle: RePEc:wai:econwp:06/06. 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: (Brian Silverstone)
If references are entirely missing, you can add them using this form.