Template-type: ReDIF-Paper 1.0
Author-Name: Agus Budiyono
Author-Name-First: Agus
Author-Name-Last: Budiyono
Author-Email: agusby@iuj.ac.jp
Author-Workplace-Name: Ministry of Internal Affairs of Indonesia
Author-Name: Ryuta Ray Kato
Author-Name-First: Ryuta
Author-Name-Last: Kato
Author-Email: kato@iuj.ac.jp
Author-Workplace-Name: International University of Japan
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Title: Should Indonesia Suffer from More Reduction of the Subsidy to the Petroleum Sector?
Abstract: We numerically examine the impact of the actually implemented reduction policy of the subsidy to the petroleum sector by using a static CGE model with the latest input-output table of Indonesia of year 2008. Our simulation results indicate that the Indonesian economy suffered from the actually implemented policy with a welfare loss of 28,417.78 billion rupiah even with the conversion policy. Furthermore, the proposed future reduction policy by the Ministry of Finance would unavoidably result in a welfare loss even when the government continues the current conversion policy. However, our simulation results also suggest that a new future conversion policy with a slightly additional subsidy to the LPG sector would eventuate in completely offsetting the negative effect of the proposed plan on the future welfare with an expanding government expenditure.
Classification-JEL: C68, D57, D58, D60, E17, H53
Length: 46 pages
Creation-Date: 2011-12
Number: EMS_2011_25
File-URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2011_25.pdf
File-Format: Application/pdf
File-Function: First version, 2011
File-Size: 900KB
Keywords: Computable General Equilibrium (CGE) Model, Petroleum, Subsidy, Welfare, Simulation
Handle: RePEc:iuj:wpaper:EMS_2011_25