Fuel subsidy reforms in ASEAN countries

Foo, Nam; Salim, Ruhul

doi:10.2139/ssrn.3913789

Cited by 1 publication

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“…While subsidies reduce economic efficiency, it is also acknowledged that subsidies are usually given to protect targeted groups (usually the lower-income ones) or to maintain consumer purchasing power (Kojima, 2017). Domestic fuel subsidies are given with strategic commodity arguments that concern the livelihoods of the majority populations (Foo et al, 2020). Fuel subsidies arise in developing countries because domestic consumer prices for fuel products are regulated directly by the government.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Fuel Subsidy to the Income Distribution: The Case of Indonesia

2023

Journal ITRev

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This paper aims to examine the potential impact of energy subsidies (fuel and liquified petroleum gas or LPG)) on income distribution in Indonesia. Indonesia suffers from the high price of crude oil resulting in an increase in fuel subsidies from imports of crude oil. The impact of fuel subsidies has the potential to favor urban and high-income groups. This form of price subsidy has a weakness because all income groups can buy subsidized fuel and LPG. Therefore, in terms of fairness, this type of subsidy is not justified. The method of measuring the effect to income groups benefited from price subsidies used in this study is Miyazawa's input-output analysis. The study finds that the lower-income groups receive less benefits than the higher-income groups, and even the top decile earns the highest income. This study provides several reform examples conducted by some developing countries in overcoming the negative impacts of fuel subsidy policies that are politically and economically relevant to the conditions in Indonesia. To reduce the negative impacts of fuel price subsidies, the study suggests several policy initiatives that need attention from the government. These include the automatic subsidy price adjustment law, implementing a sustainable fuel subsidy social program, improving data quality and implementing a separate PSO (public sector obligation) policy.

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Section: Introductionmentioning

confidence: 99%

The Impact of Fuel Subsidy to the Income Distribution: The Case of Indonesia

2023

Journal ITRev

View full text Add to dashboard Cite

show abstract

Fuel subsidy reforms in ASEAN countries

Cited by 1 publication

References 28 publications

The Impact of Fuel Subsidy to the Income Distribution: The Case of Indonesia

The Impact of Fuel Subsidy to the Income Distribution: The Case of Indonesia

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