Real and Distributive Effects of Petroleum Price Liberalization: The Case of Indonesia
October 1, 2003
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Summary
The impact of higher petroleum prices on the aggregate price level, real growth, and income distribution is appraised within a multisector computable general equilibrium (CGE) model. A reduction in the government subsidy raises petroleum prices and production costs throughout the economy. Consumer demand, production, and income decline as output prices increase and consumer purchasing power decreases. The model is applied to and calibrated for Indonesia. The simulated results predict a slight increase in price level and a slight decrease in output. An important result is that urban household groups will be the most significantly affected by the subsidy reduction.
Subject: Commodities, Consumption, Income, Inflation, National accounts, Oil, Oil prices, Prices
Keywords: CGE, Consumption, demand, determination mechanism, Income, income elasticity, Indonesia, Inflation, kerosene price, Oil, oil price increase, Oil prices, output price, petroleum prices, poverty, price, Public expenditure, subsidies, utility price, WP
Pages:
19
Volume:
2003
DOI:
Issue:
204
Series:
Working Paper No. 2003/204
Stock No:
WPIEA2042003
ISBN:
9781451874525
ISSN:
1018-5941
