Illustrative Subsidy Variations to Attract Investors : Using the Emerald-Indonesian Multi-Regional CGE Model

This paper analyze the economic impact of subsidy on industry, particularly the investor decision to invest on certain region. Using the EMERALD - Equilibrium Model with Economic Regional Analysis Dimensions, and a multi regional Computable General Equilibrium Model for Indonesia, we simulate and analyze several subsidy financing scheme in West Java. The result shows that the subsidy on Textile using non tax financing will increase the competitiveness of this sector, on the cost of the overall tradable sectors. The subsidy will increase the real regional GDP of West Java by 0.21 percent. When financing the subsidy with tax on consumer, the real GDP will increase by 0.11 percent