Estimating the Effect of a Fuel Price Increase on Poverty and Inequality: Evidence from a Fuel Subsidy Reduction in Indonesia

Abstract 
  • The fuel prices increased by the government in 2022 to reduce the burden on the national budget can lead to an increase in the poverty rate but only a slight reduction in the Gini ratio.
  • About 70% of the potential increase in poverty is mitigated by social assistance programs. In addition, social assistance potentially reduces expenditure inequality.
  • Overall, reallocation of fuel subsidy into social assistance programs is progressive, as it benefits the poor relatively more than the rich.
Research Area 
National
Keywords 
fuel price increase
inflation
demand system
poverty
inequality
Indonesia
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