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Reducing Petroleum Subsidy in Indonesia: An Interregional General Equilibrium Analysis

  • Arief A. Yusuf
  • Arianto A. Patunru
  • Budy P. Resosudarmo
Chapter
Part of the New Frontiers in Regional Science: Asian Perspectives book series (NFRSASIPER, volume 7)

Abstract

This chapter discusses the political economy of petroleum subsidy reform in Indonesia. It starts with a general review on the energy subsidy debate, followed by historical summary of subsidy regimes in Indonesia under different administrations. Using an inter-regional general equilibrium model we simulate two scenarios of petroleum subsidy reform: with and without revenue recycling through indirect tax cut. The results are evaluated at national and regional levels. We show that petroleum subsidy reform through removing the subsidy and recycling the revenue to the economy benefit the overall economy. However, the impact will vary across regions and across industries. Furthermore, we argue that public support for such reform will depend on the sectoral distribution of the resulting economic outputs.

Keywords

Fuel Price Computable General Equilibrium Model Energy Subsidy Subsidy Reform Fuel Subsidy Reform 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer International Publishing Switzerland 2017

Authors and Affiliations

  • Arief A. Yusuf
    • 1
  • Arianto A. Patunru
    • 2
  • Budy P. Resosudarmo
    • 2
  1. 1.Department of EconomicsPadjadjaran UniversityBandungIndonesia
  2. 2.Arndt-Corden Department of EconomicsAustralian National UniversityCanberraAustralia

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