•  
  •  
 

Abstract

This study investigates how fuel-price shocks and motorisation intensity affect income inequality across 34 Indonesian provinces (2016–2025). Using Random Effects, DiD, Synthetic Control, and Local Projections, we find energy shocks amplify inequality-exacerbating effects of motorisation in high-density provinces. Using a vehicle-density-based treatment indicator, the DiD estimate yields a conditional ATT of 0.39 percentage points (p = 0.442) as suggestive evidence. Impulse-response functions project a transitory Gini increase of up to 0.012 under extreme scenarios, reverting within 3–4 years. Our regional typology identifies eight resilient and six critically vulnerable provinces, providing a foundation for targeted policy interventions.

Bahasa Abstract

Studi ini menginvestigasi interaksi guncangan harga BBM dan intensitas motorisasi terhadap ketimpangan pendapatan di 34 provinsi Indonesia (2016–2025). Menggunakan Random Effects, Difference-in-Differences (DiD), Synthetic Control, dan Local Projections, kami menemukan guncangan energi mengamplifikasi dampak ketimpangan akibat motorisasi di provinsi berkepadatan tinggi. Melalui treatment indicator berbasis kepadatan kendaraan, estimasi DiD menghasilkan ATT kondisional 0,39 poin persentase (p = 0,442) sebagai suggestive evidence. Respons impuls memproyeksikan kenaikan Gini sementara hingga 0,012 pada skenario ekstrem, yang konvergen dalam 3–4 tahun. Tipologi regional mengidentifikasi delapan provinsi beresiliensi kuat dan enam provinsi rentan kritis yang memerlukan intervensi kebijakan terarah.

References

Abadie, A. & Gardeazabal, J. (2003) ‘The economic costs of conflict: A case study of the Basque Country’, American Economic Review, 93(1), pp. 113–132. https://doi.org/10.1257/000282803321455188

Beaton, C., Lontoh, L. & Wai-Poi, M. (2017) ‘Indonesia: Pricing Reforms, Social Assistance, and the Importance of Perceptions’, in Inchauste, G. and Victor, D.G. (eds.) The Political Economy of Energy Subsidy Reform. Washington DC: District of Columbia

Burke, P.J. & Nishitateno, S. (2013) ‘Gasoline prices, gasoline consumption, and new-vehicle fuel economy: Evidence for a large sample of countries’, Energy Economics, 36, pp. 363–370. https://doi.org/10.1016/j.eneco.2012.09.008

Calderón, C. & Servén, L. (2010) ‘Infrastructure and economic development in Sub-Saharan Africa’, Journal of African Economies, 19(suppl_1), pp. i13–i87. https://doi.org/10.1093/jae/ejp022

Callaway, B. & Sant'Anna, P.H.C. (2021) ‘Difference-in-differences with multiple time periods’, Journal of Econometrics, 225(2), pp. 200–230. https://doi.org/10.1016/j.jeconom.2020.12.001

Cervero, R. (2013) ‘Linking urban transport and land use in developing countries’, Journal of Transport and Land Use, 6(1), pp. 7–24.  https://www.jstor.org/stable/26202644

Coady, D., Parry, I., Sears, L. & Shang, B. (2017) ‘How large are global fossil fuel subsidies?’, World Development, 91, pp. 11–27. https://doi.org/10.1016/j.worlddev.2016.10.004

Dartanto, T. (2013) ‘Reducing fuel subsidies and the implication on fiscal balance and poverty in Indonesia: A simulation analysis’, Energy Policy, 58, pp. 117–134. https://doi.org/10.1016/j.enpol.2013.02.040

Dartanto, T. & Nurkholis (2013) ‘The determinants of poverty dynamics in Indonesia: Evidence from panel data’, Bulletin of Indonesian Economic Studies, 49(1), pp. 61–84. https://doi.org/10.1080/00074918.2013.772939

Del Granado, F.J.A., Coady, D. & Gillingham, R. (2012) ‘The unequal benefits of fuel subsidies: A review of evidence for developing countries’, World Development, 40(11), pp. 2234–2248.  https://doi.org/10.1016/j.worlddev.2012.05.005

Dorband, I.I., Jakob, M., Kalkuhl, M. & Steckel, J.C. (2019) ‘Poverty and distributional effects of carbon pricing in low- and middle-income countries: A global comparative analysis’, World Development, 115, pp. 246–257. https://doi.org/10.1016/j.worlddev.2018.11.015

Firman, T. (2017) ‘The urbanisation of Java, 2000–2010: towards ‘the island of mega-urban regions’, Asian Population Studies, 13(1), pp. 50–66.  https://doi.org/10.1080/17441730.2016.1247587

Glaeser, E.L. & Kahn, M.E. (2004) ‘Sprawl and urban growth’, in Henderson, J.V. & Thisse, J.F. (eds.) Handbook of Regional and Urban Economics, 4, pp. 2481–2527. https://doi.org/10.1016/S1574-0080(04)80013-0

Hausman, J.A. (1978) ‘Specification tests in econometrics’, Econometrica, 46(6), pp. 1251–1271. https://doi.org/10.2307/1913827

Hill, H. (2007) ‘Regional Development in Southeast Asia: Some Analytical Issues’, in Balisacan, A.M. & Hill, H. (eds.) The Dynamics of Regional Development. Cheltenham, Gloucestershire.

IMF (2024) Indonesia: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Indonesia. Available at: https://www.imf.org/en/publications/cr/issues/2024/08/07/indonesia-2024-article-iv-consultation-press-release-staff-report-and-statement-by-the-553165 (Accessed: 13 April 2026).

Inchauste, G. & Victor, D.G. (eds.) (2017) The Political Economy of Energy Subsidy Reform. Washington DC: District of Columbia.

Jiang, X., Zhang, L., Xiong, C. and Wang, R. (2016) ‘Transportation and regional economic development: analysis of spatial spillovers in China provincial regions’, Networks and Spatial Economics, 16, pp. 769–790. https://doi.org/10.1007/s11067-015-9298-2

Jordà, Ò. (2005) ‘Estimation and inference of impulse responses by local projections’, American Economic Review, 95(1), pp. 161–182. https://doi.org/10.1257/0002828053828518

Lu, H., Zhao, P., Hu, H., Zeng, L., Wu, K.S. & Lv, D. (2022) ‘Transport infrastructure and urban-rural income disparity: A municipal-level analysis in China’, Journal of Transport Geography, 99, p.103292. https://doi.org/10.1016/j.jtrangeo.2022.103292

Pesaran, M.H. (2007) ‘A simple panel unit root test in the presence of cross-section dependence’, Journal of Applied Econometrics, 22(2), pp. 265–312. https://doi.org/10.1002/jae.951

Piri, D.R. (2022) ‘Fuel Price Hike to Push Inflation Rate to Over Six Percent: Indonesia’, Kompas, 5 September.

Plagborg-Møller, M. & Wolf, C.K. (2021) ‘Local projections and VARs estimate the same impulse responses’, Econometrica, 89(2), pp. 955–980. https://doi.org/10.3982/ECTA17813

Pradiptyo, R., Susamto, A., Wirotomo, A., Adisasmita, A. & Beaton, C. (2016) Financing Development with Fossil Fuel Subsidies: The Reallocation of Indonesia's Gasoline and Diesel Subsidies in 2015. Available at: https://www.iisd.org/system/files/2020-08/financing-development-with-fossil-fuel-subsidies-indonesia.pdf (Accessed: 13 April 2026).

Ramey, V.A. (2016) ‘Macroeconomic shocks and their propagation’, Handbook of Macroeconomics, 2, pp. 71–162. https://doi.org/10.1016/bs.hesmac.2016.03.003

Rentschler, J. & Bazilian, M. (2017) ‘Reforming fossil fuel subsidies: Drivers, barriers and the state of progress’, Climate Policy, 17(7), pp. 891–914. https://doi.org/10.1080/14693062.2016.1169393

Statistics Indonesia (2025) Statistical Yearbook of Indonesia 2024. Available at: https://www.bps.go.id/id/publication/ (Accessed: 13 April 2026).

Sun, L. & Abraham, S. (2021) ‘Estimating dynamic treatment effects in event studies with heterogeneous treatment effects’, Journal of Econometrics, 225(2), pp. 175–199. https://doi.org/10.1016/j.jeconom.2020.09.006

Suryahadi, A., Al Izzati, R. & Suryadarma, D. (2020) ‘Estimating the impact of COVID-19 on poverty in Indonesia’, Bulletin of Indonesian Economic Studies, 56(2), pp. 175–192. https://doi.org/10.1080/00074918.2020.1779390

Tambun, L.T.  (2022) ‘Gov't mulls fuel price hikes as energy subsidies set to top $34b’, Jakarta Globe, 13 August.

TomTom International BV (2025) TomTom Traffic Index 2024: Indonesia. Available at: https://www.tomtom.com/traffic-index/country/indonesia (Accessed: 26 March 2026).

World Bank (2023) Indonesia Economic Prospects: Climate Action for Development. Available at: https://www.worldbank.org/en/country/indonesia/publication/indonesia-economic-prospect (Accessed: 13 April 2026).

World Bank (2024a) Indonesia Economic Prospects: Unleashing Indonesia’s Business Potential. Available at: https://www.worldbank.org/en/country/indonesia/publication/indonesia-economic-prospect (Accessed: 13 April 2026).

World Bank (2024b) Indonesia’s Fuel Subsidies Reforms. Available at: https://documents1.worldbank.org/curated/en/099748505212431959/pdf/IDU1e31e5e531f16114baa1b62c1b3201c9c2e68.pdf (Accessed: 23 April 2026).

Yang, H., Liu, L. & Wang, G., (2024) ‘Does large-scale research infrastructure affect regional knowledge innovation, and how? A case study of the National Supercomputing Center in China’, Humanities and Social Sciences Communications, 11(1), pp.1–20. https://doi.org/10.1057/s41599-024-02850-8

Yusuf, A.A. & Resosudarmo, B.P. (2015) ‘On the distributional impact of a carbon tax in developing countries: The case of Indonesia’, Environmental Economics and Policy Studies, 17(1), pp. 131–156. https://doi.org/10.1007/s10018-014-0093-y

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.