The Response of Consumption to Fuel Switching: Panel Data Estimates
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
This paper investigates on the extent to which the switching improves households' standard of living. Using a nationwide transition from kerosene to cleaner burning propane in Indonesia, I explore households' consumption response to fuel switching from a nation wide kerosene to liquid petroleum gas conversion program in Indonesia. Based on combustion efficiency and end-use energy equivalence, LPG is cleaner and more efficient than kerosene. Using variation in the timing of the implementation on four waves of the Indonesia longitudinal survey, I compare changes in expenditure within households of targeted districts with changes in expenditure within households of untargeted districts. I find that households reduce their kerosene consumption up to 100% and their fuel expenses are reduced by 40%, or 1.19 USD per month on average. These effects are higher among poor households. I do not find any response to other nondurable expenditures which provides some evidence of consumption smoothing. This is as expected considering the size of the effect is only about a 2% reduction from total monthly expenditure.
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:27653
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