GTAP Resources: Resource Display
| GTAP Resource #4426 |
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"The distributional impacts of reducing fossil fuel subsidies in Indonesia" by Durand-Lasserve, Olivier, Lorenza Campagnolo, Jean Chateau and Rob Dellink Abstract This paper focuses on the distributional impacts of a phasing out of energy consumption subsidies in Indonesia. Macroeconomic and environmental consequences are also considered. The analysis highlights the importance of redistribution schemes that can replace subsidies to make the reform progressive while being neutral for the government’s budget. A new version of the OECD ENV-Linkages CGE model is used that integrates more than 10 000 representative household groups for Indonesia, taken from IFLS4 survey data, to simulate a full phasing out of energy consumption subsidies for both households and firms at horizon 2020. Three alternative stylized redistribution schemes are considered: direct payment on a per household basis (cash transfer scenario), support to labour incomes (labour support scenario), and subsidies on food products (food subsidies scenario). It appears that the direct effect of the reform due to the increase in commodity prices (mostly energy) is regressive but that the cash transfers, and, to a lower extent the food subsidies, can make the total effect progressive. In contrast, the scenario with support to labour income is regressive, given that it fails to reach households with revenues from the informal sector, which are overrepresented among the poor. Depending on the redistribution scheme, the GDP impact ranges from +0.7% to +0.5% compared with a baseline. Beneficial impacts come from both the reduction of deadweight losses due to the subsidy phase out and from increased savings and investments. The best GDP performance is achieved by the cash transfers scenario, while food subsidies harm efficiency in the long run and labour support is detrimental to investment. |
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- Climate change policy - Economic analysis of poverty - Economic development - Asia (South-Central) |
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Public Access  GTAP Resource 4426 (851.2 KB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 9/15/2023 2:05:45 PM
