Indonesia

This paper is motivated by the common argument that clean air is a luxury good and has much less or even no value in a less developed country. It applies a hedonic property value analysis, a method commonly used to infer the value of clean air in developed countries, using a combination of data on house values and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result suggests that air quality may affect property value in Jakarta, indicating a preference toward environmental amenities. Moreover, this study is one of the first hedonic studies that may potentially give comparable estimates of the value of clean air in developing countries

Assessing the Value of Clean Air in a Developing Country: A Hedonic Price Analysis of the Jakarta Housing Market, Indonesia

This paper is motivated by the common argument that clean air is a luxury good and has much less or even no value in a less developed country. It applies a hedonic property value analysis, a method commonly used to infer the value of clean air in developed countries, using a combination of data on house values and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result suggests that air quality may affect property value in Jakarta, indicating a preference toward environmental amenities. Moreover, this study is one of the first hedonic studies that may potentially give comparable estimates of the value of clean air in developing countries.Hedonic Prices, Air Pollution, Indonesia

Is the Log Export Ban Effective? Revisiting the Issue through the Case of Indonesia

The effectiveness of a log export ban policy in achieving the twin goals of conservation and economic development has been vigorously debated by many researchers and policymakers for the last two decades or so. Despite the abundance of work focusing on this issue that demonstrates the perversity of this policy, many countries around the world still implement it. This paper will, first, review the economic and political arguments on the pros and cons of this policy. Second, it will review the Indonesian experience in implementing the policy in the 1980s and 2000s. Third, using a CGE model, this paper will predict the anticipated impact of implementing the log export ban policy on the national economy and on household incomes for various socio-economic groups.log export ban policy, conservation and economic development, national economy, household incomes, CGE

Searching for Equitable Energy Pricing Reform for Indonesia

In 2005, the Indonesian government implemented a massive fuel price increase. While the benefits of the reform on efficiency grounds have been widely acknowledged, there is still debate about whether the reform was equitable.., That question is answered in this paper using a Computable General Equilibrium (CGE) model with disaggregated households that allows for a rich and accurate distributional story. Analysis of various counter-factual scenarios analysis of the reform is carried out. It suggests that the reform could have been progressive if it increased only vehicle fuel prices. However, it tends to increase inequality especially in urban area when the price of domestic fuel (kerosene) is also increased. Proper and effective compensation is important in mitigating the distributional cost or poverty impact of the reform. A uniform cash transfer to poor households that disregards poor households’ heterogeneity tends to over-compensate the rural poor but under-compensate the urban poor.FUel pricing reform, Distribution, CGE, Indonesia

Assessing the value of clean air in a developing country: a hedonic price analysis of the Jakarta housing market, Indonesia

This paper is motivated by the common argument that clean air is a luxury good and has much less or even no value in a less developed country. It applies a hedonic property value analysis, a method commonly used to infer the value of clean air in developed countries, using a combination of data on house values and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result suggests that air quality may affect property value in Jakarta, indicating a preference toward environmental amenities. Moreover, this study is one of the first hedonic studies that may potentially give comparable estimates of the value of clean air in developing countries

Searching for Equitable Energy Price Reform for Indonesia

Indonesian government implemented a massive fuel price increase in 2005. While the benefit of the reform from efficiency ground had been widely acknowledged, whether or not such reform was equitable still open for debate. In this paper, this question is answered using a Computable General Equilibrium (CGE) model with disaggregated households that allows for rich and accurate distributional story. With this method, various counter-factual scenarios analysis of the recent energy price reform in Indonesia (October 2005 Package) is carried out. The simulations suggest that the reform could have been progresive if it only increases `vehicle fuel' prices. However, if at the same time it also increase the price of domestic fuel (kerosene), it tends to increase inequality, especially in urban area. Proper and effective compensation matters in mitigating the distributional cost or poverty impact of the reform. Uniform cash transfers to poor households disregarding poor households' heterogenity tends to over compensate rural but undercompensate urban poor. Other results suggest that non-cash compensation, by subsidizing the poor's education and health spending may not be effective to mitigate the reform despite its desirability as longer-term poverty alleviation programs

Searching for Equitable Energy Price Reform for Indonesia

Indonesian government implemented a massive fuel price increase in 2005. While the benefit of the reform from efficiency ground had been widely acknowledged, whether or not such reform was equitable still open for debate. In this paper, this question is answered using a Computable General Equilibrium (CGE) model with disaggregated households that allows for rich and accurate distributional story. With this method, various counter-factual scenarios analysis of the recent energy price reform in Indonesia (October 2005 Package) is carried out. The simulations suggest that the reform could have been progresive if it only increases `vehicle fuel' prices. However, if at the same time it also increase the price of domestic fuel (kerosene), it tends to increase inequality, especially in urban area. Proper and effective compensation matters in mitigating the distributional cost or poverty impact of the reform. Uniform cash transfers to poor households disregarding poor households' heterogenity tends to over compensate rural but undercompensate urban poor. Other results suggest that non-cash compensation, by subsidizing the poor's education and health spending may not be effective to mitigate the reform despite its desirability as longer-term poverty alleviation programs

Searching for Equitable Energy Price Reform for Indonesia

Economic structure, households energy consumption pattern, and household's pattern of factor income in developing countries may typically be different with those of the developed countries, hence the distributional impact of energy price reforms could be. This may be portrayed using a Computable General Equilibrium (CGE) model with disaggregated households that allows for rich and accurate distributional story. Using this method, counter-factual scenarios analysis of recent energy price reform in Indonesia is carried out. The result suggests that vehicle fuels subsidy is regressive but increasing the price of domestic fuel (such as kerosene) tends to increase inequality, unless accompanied by a proper and effective compensation scheme. Distributional impact does depend on compensation scheme, its form and its effectiveness. Cash transfers to the poor with moderate ineffectiveness, for example, could not even prevent the increase in poverty nation-wide. Giving more cash to urban poor than to rural poor might have been better than a simple uniform cash transfers, due to urban poor's dependence on kerosene. The result also suggests that non-cash compensation, by subsidizing the poor's education and health spending may not be effective to mitigate the reform despite its desirability as longer-term poverty alleviation programs

REGIONAL ECONOMIC MODELLING FOR INDONESIA: IMPLEMENTATION OF IRSA-INDONESIA5

Ten years after Indonesia implemented a major decentralisation policy, regional income per capita disparity and excessive rate of natural resource extraction continue to be pressing issues. There are great interests in identifying macro policies that would reduce regional income disparity and better control the rate of natural extraction, whilemaintaining reasonable national economic growth. This paper utilises an inter-regional computable general equilibrium model, IRSA-INDONESIA5, to discuss the economy-wideimpacts of various policies dealing with the development gap among regions in the country, achieving low carbon growth, and reducing deforestation. The results of simulations conducted reveal that, primarily, the best way to reduce the development gap among regions is by creating effective programs to accelerate the growth of human capital in the less developed regions. Secondly, in the short-term, the elimination of energy subsidies and/or implementation of a carbon tax is effective in reducing CO2 emission and producing higher economic growth, while in the long-run, however, technological improvement, particularly toward a more energy efficient technology, is needed to maintain a relatively low level of emission with continued high growth. Thirdly, if reducing deforestation means reducing the amount of timber harvested, it negatively affects the economy. To eliminate this negative impact, deforestation compensation is needed. Keywords: computable general equilibrium, development planning and policy, environmental economic

Regional Economic Modelling for Indonesia: Implementation of Irsa-Indonesia5

Ten years after Indonesia implemented a major decentralisation policy, regional income per capita disparity and excessive rate of natural resource extraction continue to be pressing issues. There are great interests in identifying macro policies that would reduce regional income disparity and better control the rate of natural extraction, whilemaintaining reasonable national economic growth. This paper utilises an inter-regional computable general equilibrium model, IRSA-INDONESIA5, to discuss the economy-wideimpacts of various policies dealing with the development gap among regions in the country, achieving low carbon growth, and reducing deforestation. The results of simulations conducted reveal that, primarily, the best way to reduce the development gap among regions is by creating effective programs to accelerate the growth of human capital in the less developed regions. Secondly, in the short-term, the elimination of energy subsidies and/or implementation of a carbon tax is effective in reducing CO2 emission and producing higher economic growth, while in the long-run, however, technological improvement, particularly toward a more energy efficient technology, is needed to maintain a relatively low level of emission with continued high growth. Thirdly, if reducing deforestation means reducing the amount of timber harvested, it negatively affects the economy. To eliminate this negative impact, deforestation compensation is needed