The Impact of Fossil Fuel Subsidies on Growth

The main objective of this research is to examine the relationship between fossil fuel subsidies and growth. In order to achieve this objective, the research employs panel data analysis. However, due to the difficulties in obtaining the data about subsidies, the sample and the time frame have been selected based on the availability of the fossil fuel subsidies data. The sample consists of 37 countries, including Indonesia. Instead of the key variable (fossil fuel subsidies), the study also employs others determinants of growth as independent variables, namely openness (OPEN), gross capital formation (CF) and secondary school enrolment. Many studies have been conducted to investigate the impact of subsidies on growth. However, by employing more recent data and better methods, this research focuses on the impact of fossil fuel (both in total and for each type of the fossil fuel energy) subsidies toward growth. The result of the regression confirmed that fossil fuel subsidies, coal subsidies, electricity and natural gas subsidies have negative and significant impact toward growth. However, the research found that oil subsidies are negative but not significant toward growth. The result on other explanatory variables shows that openness (OPEN) capital formation (CF) and gross secondary school enrolment (secgrt10) are positive and significant toward growth.