INDONESIA-E3: An Indonesian Applied General Equilibrium Model for Analyzing the Economy, Equity, and the Environment

INDONESIA-E3 is a CGE (Computable General Equilibrium) model built to analyze the Economy, Equity, and the Environment - the three inter-related aspects of sustainable development. It is a multi-sectors, multi-households CGE model that incorporate carbon emissions and taxation and with a strong feature in distributional analysis. It can be used, for example, to study the impact of environmental reforms, such as carbon emission reduction and energy pricing policy, has on inequality and poverty for the case of Indonesia. The model captures the inter-dependence among markets in the determination of both price of commodities and factor of productions and how it will affect distribution of income. As a departure from the previous literature, the disaggregation of household by expenditure classes allows for precise estimates of the distributional impact and poverty incidence. This paper describes the model structure such as production and consumption structure, database, parameters, method for distributional analysis, possible closures, and and method for sensitivity analysis.