Household’s Welfare Impact of Fuel Subsidy Removal

This paper aims to analyze the energy subsidy removal on the households’ welfare in Indonesia. First, we will model theoretically the welfare change measurement. In this paper, we will apply Compensating Variation (CV) and Equivalent Variation (EV) under Linear Expenditure System (LES). Second, we will estimate empirically the model by using National Social Economic Survey (Survei Sosial Ekonomi Nasional, SUSENAS) and Cost of Living Survey (Survei Biaya Hidup) data. Third, by using the estimated CV and EV, we will simulate the impacts of the energy subsidy removal on the households’ welfare. The CV and EV can be considered as the compensation should be given to the poor households