IDEAS home Printed from https://ideas.repec.org/a/wsi/adrxxx/v39y2022i01ns0116110522500081.html
   My bibliography  Save this article

Impacts of Fuel Subsidy Rationalization on Sectoral Output and Employment in Malaysia

Author

Listed:
  • NOORASIAH SULAIMAN

    (Center for Sustainable and Inclusive Development Studies, The National University of Malaysia, Malaysia)

  • MUKARAMAH HARUN

    (Universiti Utara Malaysia College of Business, Malaysia)

  • ARIEF ANSHORY YUSUF

    (Center for Sustainable Development Goals Studies, Padjadjaran University, Indonesia)

Abstract

Large allocations for fuel subsidies have long put the Government of Malaysia’s budget under great strain. Using a computable general equilibrium (CGE) model, this paper evaluates the impact of fuel subsidy rationalization on sectoral output and employment. Employment is classified into occupational categories and skill levels. Fuel subsidies were measured using the disaggregation of prices for petrol, diesel, and other fuel products. Findings show that removing fuel subsidies would hit economic performance through high input costs, specifically for industries closely attached to the petroleum refinery sector. The manufacturing sector has the largest reduction in output and employment. Nevertheless, high- and medium-skilled labor forces experience increased demand. To increase economic efficiency, the savings from the removal of fuel subsidies should be put toward policies such as sales tax reduction. This study provides useful information for policy makers in evaluating or updating current subsidy policies to reduce economic losses.

Suggested Citation

  • Noorasiah Sulaiman & Mukaramah Harun & Arief Anshory Yusuf, 2022. "Impacts of Fuel Subsidy Rationalization on Sectoral Output and Employment in Malaysia," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 39(01), pages 315-348, March.
    • Handle: RePEc:wsi:adrxxx:v:39:y:2022:i:01:n:s0116110522500081
    DOI: 10.1142/S0116110522500081
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0116110522500081
    Download Restriction: Open Access
    File URL: https://libkey.io/10.1142/S0116110522500081?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    computable general equilibrium model; employment; fuel subsidy; sectoral output; subsidy removal;
    All these keywords.

    JEL classification:

    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:adrxxx:v:39:y:2022:i:01:n:s0116110522500081. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: https://www.worldscientific.com/worldscinet/adr .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.