The impact of environmental policies on household incomes for different socio-economic classes: The case of air pollutants in Indonesia

With outdoor air pollutants in Indonesia as a case study, this paper expands a Social Accounting Matrix to include the link from the economy to the environment, as well as the link from the environment to the economy. This paper explores the relationship between production activities, pollution, and human health problems. It utilizes the Constrained Fixed Price Multipliers method to analyze the impact of policies designed to reduce the amount of pollutants in the air on household incomes for different socio-economic classes in Indonesia. The results show that if policies designed to reduce the amount of pollutants in the air do not decrease the output of production sectors, then the policies also improve income distribution.