Analysing Fuel Subsidy and Taxation Reform with Input–Output Data

For a long time, the use of intermediate products in production has been growing more rapidly in most countries than domestic production. This is a strong indication of more interdependency in production. The main purpose of input-output analysis is to study the interdependency of industries in an economy. Often the term interindustry analysis is also used. Therefore, the exchange of intermediate products is a key issue of input-output analysis. We will use input–output data for this study that the author prepared for the new ‘Handbook on Supply, Use and Input–Output Tables with Extensions and Applications’ of the United Nations. The supply use and input–output tables contain separate valuation matrices for trade margins, transport margins, value added tax, other taxes on products and subsidies on products. For the study, two input–output models were developed to evaluate the impact of fuel subsidy and taxation reform on output, gross domestic product, inflation and trade. Six scenarios are discussed covering different aspects of the reform.