Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia

Susan Olivia and John Gibson

No 25745, 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia from International Association of Agricultural Economists

Abstract: The proper design of price interventions 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 at high levels of inequality aversion there is a strong case for reducing the large subsidies on gasoline and kerosene, supporting the reforms that have been carried out recently.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 16
Date: 2006
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia (2008)
Journal Article: Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia (2008)
Working Paper: Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae06:25745

DOI: 10.22004/ag.econ.25745

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