Eliminating the fuel subsidy in Indonesia: using behavioural insights to design alternative policies

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

ACDE Seminar

Date & time

Tuesday 21 April 2015


Coombs Seminar Room B, Coombs Building 9, Fellows Road, ANU


Dr Rimawan Pradiptyo, Universitas Gadjah Mada, Indonesia.


Arianto Patunru

The fuel subsidy in Indonesia creates huge inefficiency and inequality as the subsidy is implemented on the price of fuel, instead of being targeted at the household. Any attempt to eliminate the subsidy, no matter how plentiful and good the improvements in efficiency and equality will be, may not be perceived positively by households. This study uses insights from behavioural economics to design alternative policies and assesses households’ preferences of alternative policies to eliminate the fuel subsidy in Indonesia using a computer-based survey. The results suggest that the group of car owners prefer a gradual elimination of the subsidy regardless of the reallocation schemes. In contrast, participants who do not possess car or motor cycles prefer sudden elimination of the subsidy.

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