No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Household Welfare and CO 2 Emission Impacts of Energy and Carbon Taxes in Mexico
Abstract
We analyse the effects of environmental taxes on welfare and carbon emissions at the household level for the case of Mexico. The integrated welfare-environmental analysis, which is based on a censored energy consumer demand system, extends previous work in two ways. First, the estimation of a full matrix of substitution elasticities allows us to test the necessity of incorporating second-order effects into the welfare analysis. Second, the substitution elasticities derived from the demand system are used to estimate the shortrun CO2 emission-reduction potential. We find that first-order approximations of welfare effects provide reasonable estimates, particularly for carbon taxes. Analog to evidence in other low- and middle-income countries, the taxation of all energy items is found to be regressive, with the exception of motor fuels. The analysis of the emission implications of different tax scenarios indicates that short-run emission reductions at the household level can be substantial - though the effects depend on how revenue is recycled. This effectiveness combined with moderate and manageable adverse distributional impacts renders the carbon tax a preferred mitigation instrument. Considering the large effect of food price increases on poverty and the limited additional emission-saving potential, the inclusion of CH4 and N2O in a carbon tax regime is not advisable.
... On the other hand, the study of energy demand in the context of a complete demand system to analyse the effects of different policies affecting the energy sector has also received attention. Thus, Moshiri and Martinez (2018) study the effects of increases in the prices of energy products as a result of the 2014 Mexican energy reform; Renner et al. (2018) analyse the effects of the introduction of a carbon tax; Rosas-Flores et al. (2017) and Labeaga et al. (2021) study the impacts of the removal of energy subsidies and the introduction of carbon taxes; Ramírez et al. (2021) assess the impact of the 2014 Mexican energy reform; while Ortega and Medlock (2021) study the elasticity of demand for energy products as a function of household income level. ...
... This suggests that higher energy taxes would fall mainly on the rich. In the case of gasoline, Renner et al. (2018), Ortega and Medlock (2021), Labeaga et al. (2021) or Ramírez et al. (2021) also identify it as a luxury good, while for food the results are similar to those obtained by Renner et al. (2018). In the case of LPG, Rosas-Flores et al. (2017) also identify it as a normal good, while for electricity the results are like those obtained by Labeaga et al. (2021) for households without a vehicle. ...
... This suggests that higher energy taxes would fall mainly on the rich. In the case of gasoline, Renner et al. (2018), Ortega and Medlock (2021), Labeaga et al. (2021) or Ramírez et al. (2021) also identify it as a luxury good, while for food the results are similar to those obtained by Renner et al. (2018). In the case of LPG, Rosas-Flores et al. (2017) also identify it as a normal good, while for electricity the results are like those obtained by Labeaga et al. (2021) for households without a vehicle. ...
The main aim of this paper is to analyze the different impacts of carbon taxation inMexican households at different income levels. First, we estimate a household demandsystem for non-durable goods with special emphasis on energy-related goods. Then, weuse the results to simulate the introduction of a carbon tax. We look at the potential toraise revenue with the aim of implementing different redistributive policies in order toaddress issues of inequality and poverty. Moreover, we evaluate the effects of carbontaxes on demand and emissions reduction.
... Our results for gasoline are similar to the findings of Olivia and Gibson (2008), but they contrast with those reported by Eltony and Al-Mutairi (1995) for Kuwait and those of Crôtte et al. (2010) for Mexico despite employing aggregate data. Mexican studies using micro data also identify gasoline as a luxury commodity (Moshiri and Martinez, 2018;Renner et al., 2018). However, along with Rosas-Flores et al. (2017), they do provide 20 As indicated in section 2, geographic inequality marks economic development in Mexico: both northern and central Mexico have the highest human development index, nearly at a developed-country level, while the southern states are well below this situation. ...
... We additionally find that all the households in the sample have an inelastic response toward gasoline price changes, although the absolute values of their price elasticity are very close to 1. These results fall in line with those of Eskeland and Feyzioglu (1997a) using aggregate data and those obtained by Renner et al. (2018) and Moshiri and Martinez (2018). However, they are higher (in absolute value) than those reported by Rosas-Flores et al. (2017); this may be due to the lower reliability of an AIDS model in dealing with Mexican energy demand (see section 3.1). ...
... This progressive impact confirms the results obtained by Sterner and Lozada (2012) or Renner et al. (2018), who found that a tax on the direct use of fuel (or a CO 2 gasoline tax in the case of Cespedes (2013)) in Mexico would be strongly progressive; by Abramovsky and Phillips (2015), who found that the Mexican tax reform of 2010 (increased VAT rate together with minor changes in income and excise duties) was progressive when spending was used to measure the standard of living; by Huesca and López-Montes (2016), who indicated that Mexican gasoline taxes tend to be borne by households with higher incomes; or by Rosas-Flores et al. (2017), who showed that Mexican gasoline subsidy was noticeably regressive. 28 On the other hand, as shown by Renner et al. (2018) for Mexico, Williams et al. (2015) for the United States, Durand-Lasserve et al. (2015) for Indonesia or Douenne (2020) for France, the redistribution of tax revenues to households is more progressive and more effective in reducing poverty rates, especially if it only targets the poorer households. ...
Equity and efficiency are crucial issues behind any tax reform, but they are particularly relevant in countries with high inequality and large shares of poverty. This paper provides a comprehensive socio-economic empirical assessment of Mexico's proposed (and partially implemented) tax reforms in the energy domain, and of a hypothetical partial removal of existing electricity subsidies. Using a rich household income and expenditure survey within the context of a demand system adjustment of non-durable goods, the article provides the public-revenue, environmental and distributional impacts from the simulation of different combinations of energy taxation, subsidy-removal and distributive offsets. The paper also provides detailed ex-ante evidence on the effects of compensatory devices that may contribute to the successful implementation of energy reform packages and significant poverty alleviation in Mexico.
... As a result, there would be a dramatic decrease in CO 2 emissions, and the country has the capacity to maintain carbon neutrality. These results are supported by the research of Renner et al. (2018), which examines the carbon taxes impacts on carbon neutrality. The study claims that if the carbon taxes are imposed effectively, businesses and individuals try to have knowledge of which resources or processes would be responsible for CO 2 emissions and which practices they must perform in order to mitigate CO 2 emissions. ...
The existing millennium documents the most adverse consequences of global warming which in contrast to pre-industrial era are more devastating. Thus, these prevailing consequences raise numerous concerns regarding the well-being of future and current generation. Scholars, in this regard, are putting efforts punctiliously towards methods that could halt the surging emissions. This paper also attempts to contributes to existing literature by reporting the empirical evidences regarding the role of energy transition technologies, renewable energy production (REP), trade openness, green investment, and carbon taxes in carbon neutrality in Chinse economy covering the time span of 1980–2020. By employing Dynamic Auto-regressive Distributed Lags (DARDL) model to check the association, findings exposed that electricity production from water sources, electricity production from solar sources, REP, trade openness, green investment, and carbon taxes are negatively correlated with CO2 emissions. Study offers policymakers a help in formulating policies related to achieve carbon neutrality using renewable sources of energy production, carbon taxes, and green investment.
... Calculation-or model-based studies generally investigated the effects of taxes and subsidies on welfare , on households' carbon footprints (Latka et al., 2021;Panzone et al., 2021;Renner et al., 2018), and on individuals' tax burden . When dealing with model calculations, it is important that interpretations consider the fact that consumer acceptance of policy instruments remains unknown. ...
The current food system is not sustainable, and food consumption contributes substantially to the climate crisis. Several challenges make it difficult for consumers to make sustainable food decisions. Therefore, policy action is indispensable to reduce the environmental impact of food choice. We present the results of a literature review of 160 studies, investigating four types of consumer-targeted policy instruments (market-based, information-based, regulatory, and nudging) and their potential to improve the sustainability of food systems. Our results show that (i) less intrusive policy instruments (information-based, nudging) are more popular and widespread and can be combined (however, more intrusive instruments [market-based, regulatory] are more effective); (ii) consumers rely on information-based instruments to make sustainable food choices and are willing to pay a price premium for sustainable products; and (iii) sociodemographic characteristics such as gender (female) and education level (higher) play a key role in sustainable food choices. Finally, we recommend improvements in the transparency of reporting methods and definitions used to describe sustainability of food products. This would increase the potential for comparison, transferability, and generalisability of findings and enable the development of effective policies. Sustainability is a pressing issue, and joint efforts along the food system are urgently called for.
... Local governments develop regional economies at the expense of environment deterioration. Renner et al. (2018) and Farajzadeh (2018) studied the effect of carbon taxation on carbon emissions at the household consumption level in Mexico and Iran, respectively. They found that carbon taxation could effectively reduce carbon emissions in the short term. ...
Chinese-style decentralization has brought about the miracle of rapid economic growth for more than thirty years in China. However, with the implementation of the coordinated development strategy of economy and environment, it has set up obstacles to the decrease in regional carbon emissions. In this study, we clarified the effect of Chinese-style decentralization on regional carbon emissions. Then, we tested the effectiveness of emission reduction policies and their potential emission reduction spaces under the Chinese-style decentralization using the panel data of China’s 12 urban agglomerations. The research results are: (1) Chinese-style decentralization affects regional carbon emissions mainly through factor market distortion, investment bias, and environment regulation. (2) Under the influence of Chinese-style decentralization, the effectiveness of emission reduction policies is not fully realized and shows significant spatial interaction. (3) 1% increase in political decentralization causes an 8.9% decrease in the effectiveness of executive order policy; 1% increase in fiscal revenue decentralization causes a 7.1% decrease in the effectiveness of carbon tax policy; 1% increase in financial decentralization causes a 10.6% decrease in the effectiveness of the cleaner production policy. (4) Collaborative governance of carbon emissions between regions is the direction of future emission reduction, and the redesign of emission reduction policies should be formulated based on the degree of regional synergy.
... Modelling the impact of the tax in Washington, Mori (2012) shows that such regulation could contribute to decreasing emissions by 8.4%, compared with business-as-usual predictions. In a partial equilibrium framework in Mexican households, Renner, Lay, and Greve (2018) demonstrate that the tax could induce small welfare gains and largely reduce CO 2 emissions. Xu et al. (2018) simulate various scenarios and tax rates, with largely different impacts, ranging from 2% to 10% reductions. ...
Carbon taxation affects carbon dioxide (CO2) emissions through the price of fossil fuels, and hence can also affect emissions of air pollutants. Based on this fact, this study aims at exploring the impact of the carbon tax in Japan on various pollutants’ emissions, using a regression-based approach. The main contribution of this study is to assess the impact of a tax that is mainly directed at cutting CO2, on other gases, namely sulphur dioxide (SO2), suspended particulate matter (SPM), carbon monoxide (CO) and nitrogen oxide (NOX), as well as analyzing the impact of this tax on different sectors of the Japanese economy. Our results imply that the introduction of the carbon tax in Japan effectively reduced non-CO2 greenhouse gases (GHGs) and pollutants, even when controlling for demographic and economic variables. The results of this study can be explained by a partial decoupling of fossil fuel consumption and GHG emissions, possibly through investment in anti-pollution measures.
... However, the two streams remain distinct in the empirical litera-ture, as the former is preferred within the industrial organization discipline ( Nevo, 2011 ) and marketing ( Chintagunta and Nair, 2011 ) and the latter remains relatively popular in some applied policy fields, e.g. health ( Jofre-Bonet and Petry, 2008 ) energy ( Renner et al., 2018 ) or food ( Atkin, 2013 ). The empirical trade-offs between the two methods are clear, with DCMs being preferred for highly differentiated products and CDSs having more immediate applications when the focus is on substitutions between aggregate categories of goods and often chosen for welfare analysis. ...
JEL classification: D11 D12 H31 L66 Q18 Keywords: Reference price Price elasticities Demand models Soft drinks Loss aversion a b s t r a c t Canonical demand studies and fiscal policy simulations rest on the assumption that consumers react symmetrically to price increases and decreases. Such assumption has been challenged from both the empirical and theoretical points of view. We propose theoretically consistent empirical specifications to estimate discrete choice models (random utility DCM) and continuous demand systems (EASI and AIDS demand systems) that allow for reference prices and asymmetric own-and cross-price demand response. Our application focuses on the demand for sugar-sweetened beverages in Great Britain, using transaction-level household purchase data and different product aggregation levels. We find substantial evidence of asymmetric consumer response and loss aversion, with a stronger response when prices rise above their reference level. Our results hold for both DCMs on highly differentiated products and demand systems on aggregate product categories, and are robust to alternative model and reference price specifications. Simulations of taxes and subsidies on soft drinks shows that ignoring asymmetry may lead to biases, especially when predicting price cuts.
The high level of nitrogen emissions over the last decades and their adverse impact on the natural environment
and human health are a pressing environmental issue. A nitrogen tax can be a cost-efficient and effective policy
instrument to reduce nitrogen emissions. However, adverse effects on low- and middle-income households might
lead to societal and political frictions that could end up in resistance. In this paper we investigate how a hypothetical
nitrogen tax covering the specific external costs of nitrogen could be implemented and estimate its
short-term distributional effects on household income groups in Germany. The findings show that the proposed
tax would be regressive. However, if the tax rate is set equal to the true cost of nitrogen, the monetary impacts
would overall be small, ranging from 1.15% of income for the first income quintile to 0.66% for the fifth.
Complementary policy measures to lower the burden on low-income households, farmers and the energy sector
could preempt social resistance against the tax.
Climate change has made the decarbonization of the different domestic economies a widely accepted and urgent priority. Yet, this is a very challenging task in a largely uncharted territory. In this context, in this paper, we address the issue of energy taxation reform with an environmental focus in Portugal. We do so using a multi-sector and multi-household dynamic computable general equilibrium model of the Portuguese economy. We analyze the environmental, macroeconomic, and distributional effects of different policies replacing current energy taxation with carbon taxation and, then, extend the carbon taxation to the levels necessary to achieve the IPCC 2018 emissions reduction targets. Our analysis indicates a clear path in the quest for decarbonization. First, replace energy taxes with a carbon tax; second, adopt the levels of carbon taxation necessary to achieve the emissions goals; third, use extra tax revenues from the carbon tax to reverse any potential adverse macroeconomic and distributional effects of carbon taxation. In the process, this would be a way around the pervasive problem of perverse fossil fuel subsidies, which would effectively disappear and, as such, would improve the efficiency of the tax system.
As one of the most important instruments for reducing emissions from fossil fuels, taxes have been widely used in government battles against air pollution and climate change across the world. However, the pass-through of taxes and their effect on emissions are not evident in all situations. This study investigates the pass-through of diesel consumption taxes to retail prices and estimates the consequent effect on diesel consumption and carbon emissions in China. The results show that the pass-through rate of diesel taxes in China is around 0.49. Also, there is a significant effect of an oil company's market share on the pass-through rate. Based on the pass-through rate and estimated price elasticity, we conduct further estimations of the impact on diesel consumption and carbon emissions and find that the increase in the diesel consumption tax in 2014/2015 reduces 1.64% of annual diesel consumption and 0.096% of annual carbon emissions in China.
This study examines the unintended effects of the water regulation on household livelihood in China, from the perspective of Engel coefficient. Applying county-level water regulation dataset and CFPS household dataset in a difference-in-difference-difference (DDD) specification, the research finds that the regulation increases the Engel coefficient by an additional 2.6%. Mechanism analyses show that water regulation influences the Engel coefficient through increasing household food expenditure, as it also causes local market fluctuations in meat products. Overall, this study sheds new light on the economic costs of environmental regulation.
Imposing a tax on carbon emissions has a mitigating impact on the carbon rebound effect. However, such taxes will also cause a decline in people's welfare. This paper studies the impact of carbon taxation on the CO2 rebound effect and the welfare of Chinese urban households using a multi-regional input-output model and an almost ideal demand system model. The results show that a tax rate of US$ 7.75/tCO2 could mitigate the urban residents' CO2 rebound effect by 14%–57%. This tax rate will also lead to an increase between 0.65% and 1.9% in urban households' total expenditure. In certain provinces, including Qinghai, Hainan, and Xinjiang, the residents' CO2 rebound effect is not considerably reduced, but their welfare experiences substantial losses after the implementation of a carbon taxation policy. However, in some provinces, including Jiangsu, Guangdong, and Henan, the residents' CO2 rebound effect could be significantly reduced while the household welfare showed fewer losses when introducing carbon taxation. Based on empirical research results, we propose that the Chinese government should introduce a higher carbon tax rate nationwide and grant subsidies to provinces such as Qinghai to balance carbon emission reduction targets and residents' acceptance of carbon taxation.
Although carbon tax policies can effectively restrain energy consumption and reduce pollution, they will also affect the welfare of residents through a price mechanism. We explore the impact of energy price increases that are caused by possible carbon tax policies on the welfare of residents in China with a quadratic almost ideal demand system (QUAIDS) model. The estimated elasticities show that the income elasticity of coal demand is −0.741 for urban residents, compared to 0.392 for rural residents. The cross-price elasticity shows that China's residential energy consumption has moved up the clean energy ladder. Based on the above reliable elasticity estimates, the welfare effects are analyzed in the residential consumption system. The overall welfare loss for residents increases with the level of carbon tax. A carbon tax on all energy sources is a regressive policy for China, and when the carbon tax rate reaches the world average, of 30 USD/tCO2e, the welfare loss for low-income and high-income residents is 1.55% and 0.62% respectively. However, the separate imposition of carbon taxes on different energy sources shows the heterogeneity of the welfare impacts of carbon taxes. At the national and urban levels, the distribution effects of carbon taxes are regressive for coal, LPG, and electricity, progressive for gasoline, and distributional neutral for natural gas. In rural areas, however, the welfare distribution effect of the carbon tax on diesel, LPG, and natural gas are progressive, and the welfare effects of carbon taxes on electricity show an inverted U-shaped distribution. Our findings are conducive to the development of a differentiated carbon tax policy by the Chinese government.
In the new urbanization process, local government decision-making competition (LGC) is the key factor of carbon emissions. In most similar studies, the administrative orders, the strategic development paths, environmental policies, etc. are not considered, and it is difficult to help local governments to formulate precise emission reduction policies. The research logic of this study is “empirical evidence summary, theoretical explanation, and heterogeneity analysis”. First, the relationship between LGC and carbon emissions is explored through data fitting and mathematical modeling based on China’s six major urban agglomerations. Second, the effect mechanism of LGC on carbon emissions is analyzed theoretically by a nonlinear programming model. Third, the heterogeneities of the effect paths at different stages are discussed and targeted emission reduction measures are put forward. The results are: (1) There is a three-stage nonlinear relationship between LGC and carbon emissions, and the turning points are LGC = 0.53 and 0.64. (2) LGC affects carbon emissions through distorting the factor markets, government investment, and the implementation of environmental policies. (3) At the rapidly increasing stage, the carbon intensity of the “enclave economy” is 473$/ton; 84.63-million-yuan increase of fiscal revenue causes1 ton increase of carbon emissions under the land finance; The phenomenon of “race to the bottom” and “free riding” are serious. (4) At the slowly increasing stage, 23-million-yuan increase of debt financing increases 1 ton of carbon emissions; The carbon emission intensity of the “industrial park” economy is $1655/ton; Investment of 28.75 million yuan in technology transfer reduces 1 ton of carbon emissions. (5) At the gradually decreasing stage, 7% increase of total factor productivity could decrease 1 ton of carbon emissions; Investment is biased towards the science, education, culture, health, and business environment optimization; 26.75 million yuan of fiscal investment reduces 1 ton of carbon emissions; There exists “race to the top” in environment governance. Research in this paper could provide a basis for the central and local governments to formulate differentiated and targeted emission reduction policies.
We quantify the vertical (i.e. between income differences) and horizontal (i.e. within income differences) distributional effects of carbon taxation using a fully flexible demand system and Irish data. The model avoids imposing the curvature of the relationship between income and energy demand. We show that neglecting this fact can lead to misleading policy conclusions. We also show that losses in purchase power are the main channel of welfare losses. Losses due to limitations for energy substitution play a minor role. We found that rural households and householders in retirement age are the most affected by carbon taxation. Regarding horizontal effects, we show that higher heterogeneity in the tax burden is experienced by couples with dependent children and those in urban households. These findings highlight the importance of quantifying both horizontal and vertical distributional effects when designing carbon taxes and revenue recycling mechanisms. Within distributional effects are larger than between distributional effects regarding income inequality of the tax and revenue recycling mechanisms. We found that a targeted transfer is preferred over a lump-sum transfer in reducing welfare losses caused by the regressivity of taxation. These findings hold when measuring both horizontal and vertical distributional effects.
We assess the distributional impact of introducing a carbon tax in a small open economy, using the case of Poland. We use a dynamic general equilibrium model with a search mechanism in the labour market, soft-linked to a microsimulation model based on household budget survey data. We evaluate the impact on various income groups and on inequality. We account for four key channels: the direct (energy) and indirect (other goods) price effects, behavioural adjustment of consumption, and changes in labour income. We consider three of ways to recycle the carbon tax revenue: lump-sum transfer, energy price subsidies, and labour tax reduction. We find that the distributional effects depend on the recycling of revenues. Using them to reduce labor taxation attenuates the negative effect of carbon tax on GDP and employment but increases inequality compared to a lump-sum transfer to households. This finding highlights the trade-off between efficiency and equity. Our results could be relevant for other countries producing fossil fuels, such as South Africa, Germany, or Australia.
Brazilian energy-related GHG emissions have increased sharply in recent decades due to energy tax policies and weather changes. To understand the distributional effects and calculate the cost-effectiveness of these energy tax policies, we assess short-term GHG emissions and welfare impacts of poor and rich households in Brazil. To do this, we calculate the carbon footprint of 128 household products and estimate price and expenditure elasticities using a censored demand system with price corrections and instrumental variables. We analyze the effect of de facto tax and subsidy rates and other environmentally friendly tax policies on end consumer prices. Our findings suggest that taxes on gasoline/diesel pump prices are progressive and have a negative impact on total household energy emissions due to substitution effects. Despite being regressive, changes in electricity and gas/charcoal pricing have considerable effects on household emissions due to the characteristics of the electricity supply in Brazil. More environmentally friendly policies that subsidize ethanol are cost-effective, but have small effects on household emissions.
In the present study, the association of household livelihood and income inequality with sustainable food security was assessed in the rural areas. We used a cross-sectional data and quantitative analysis to follow the main goal of the study. Data were collected using a questionnaire through face-to-face interviews of a random sample of rural households. Food security status was assessed using HFIAS and FCS indexes, while household welfare was calculated by six indicators. Also, income inequality was measured using Theil, Atkinson, and FGT indexes. This study was implemented in Dowreh Chegeni county in Lorestan province in Iran. The questionnaires were completed by 201 households in the study location. The target sample consists of the households who are living permanently in the rural area. Of the total sample 40.79% were food secure, while about 13.4%, 14.4%, and 31.3% of the sampled households faced marginal, moderate, and severe food insecurity. All welfare indicators showed that degree of income inequality of the households in marginal and moderate categories was greater than other households. The results showed that household welfare is directly and significantly associated with food security. This suggests the wisdom of the government and the related organizations focusing on improving the welfare status of the households using different policies such as providing affordable houses for poor households, preparing long-term loans for the households to purchase their needed assets, and facilitating the purchase of livestock for the rural households to produce their needed foods.
In China’s 2019 VAT reform, the VAT rate for manufacturing was adjusted from 16% to 13%. This inevitably promotes manufacturing production and triggers a substantial increase in carbon emissions. Would carbon tax be an effective policy tool to offset the negative externalities of the VAT reform on carbon emissions? We construct a multi-regional dynamic-recursive computable general equilibrium (CGE) model to evaluate this possibility and to investigate the potential impacts on the economy, energy, and environment arising from this reform. The scenarios set includes the VAT reform policy, a carbon tax, and three combined policies. The results show that while China’s VAT reform is a positive fiscal policy that can boost long-lasting macroeconomic development, it has a negative impact on environmental protection. A carbon tax can significantly curb traditional energy consumption and emissions, but it would hinder economic development. Combined policies yield ‘double dividends’, that is, a long-run increase in macroeconomy and emissions reductions will be achieved, helping China to attain its Intended Nationally Determined Contributions goal. The combination of VAT reform and a stepped carbon tax maintains a more stable economic growth while sustaining carbon emission abatement.
This paper studies the distributional impacts of a carbon tax in Austria and explores compensating measures to mitigate negative side effects. We extend previous studies by focussing on household heterogeneity, i.e. how housing attributes and socio-demographics govern a household's vulnerability to energy price increases. We apply the EASI demand system, which captures non-linear Engel curves and heterogeneous preferences; both crucial to estimate energy consumption. By simulating stylised, separate price increases we identify how seemingly overall similar welfare effects differ, depending on the energy good taxed, the region a household lives in, year of construction and household composition. These impact channels, with the severity of impacts differing according to various household characteristics are also reflected by the carbon tax scenario and reveal the importance of targeted support schemes. Although, each of the tested transfer schemes is able to enhance equality and cushion negative welfare effects, transfer schemes focussing on household size or on particular vulnerable population segments show the strongest effects in terms of equality, proportionality of the tax burden and welfare. Consequently, in order to yield a socially fair energy or carbon tax regime, taking household heterogeneity into account is essential.
A new approach rooted in economic theory is proposed to analyse the relationship between fuel poverty and income poverty using self-reported data. The model shows that neglecting the overlap between income and fuel poverty underestimates the metrics for the change in income poverty due to increases in carbon taxes. The model is parametrized using econometric methods. Being a single adult with dependent children, having low education levels, low income levels and having darkness or dampness in the dwelling increases the probability of being fuel poor. The estimates show that an 1% increase in carbon taxes will raise the number of people experiencing fuel poverty by 0.5%. It is also shown that while increases in lump-sum transfers are progressive, increases in energy prices and energy required to heat a dwelling are regressive. Among poor households, fuel poor households have the lowest income levels, have issues with dampness, and it is less likely that they have double glazing in their dwellings compared to other income poor households. Income and fuel poverty are two distinctive problems that require different policy instruments. Policies need to address income and energy efficiency inequalities simultaneously to counteract the regressive effect of carbon taxes in Ireland.
According with a growing sense of climate change in recent decades, an increasing number of works have focused on the impacts of climate on tourism. However, few studies to date have investigated the impacts of various emissions policies on tourism, leading to an ambiguous understanding of tourism adaption to emissions policy change. Here this study attempted to provide a framework to guide future research on tourism change under the leading emissions policies worldwide (i.e. the carbon tax and emissions trading scheme). Regarding the policy setting, this study suggests both the policy diversification within the emissions trading scheme or carbon tax and their comprehensive study. Regarding the research subject, this study recommends taking into account overall or sectoral impacts on different tourism economic and environmental variables. Moreover, future efforts should be devoted to not only simulating future change but also quantifying the actual impacts on tourism based on existing data. Regarding the methodology, this study strongly recommends four methods for assessing the impacts of emissions policies on tourism, including the augmented computable general equilibrium model, dynamic stochastic general equilibrium model, difference-in-differences method, and regression discontinuity method.
We conduct a multi-model comparison of a carbon tax policy in China to examine how different models simulate the impacts in both near-term 2020, medium-term 2030, and distant future 2050. Though Top-down computable general equilibrium (CGE) models have been applied frequently on climate or other environmental/energy policies to assess emission reduction, energy use and economy-wide general equilibrium outcomes in China, the results often vary greatly across models, making it challenging to derive policies. We compare 8 China CGE models with different characteristics to examine how they estimate the effects of a plausible range of carbon tax scenarios – low, medium and high carbon taxes.. To make them comparable we impose the same population growth, the same GDP growth path and world energy price shocks. We find that the 2030 NDC target for China are easily met in all models, but the 2060 carbon neutrality goal cannot be achieved even with our highest carbon tax rates. Through this carbon tax comparison, we find all 8 CGE models differ substantially in terms of impacts on the macroeconomy, aggregate prices, energy use and carbon reductions, as well as industry level output and price effects. We discuss the reasons for the divergent simulation results including differences in model structure, substitution parameters, baseline renewable penetration and methods of revenue recycling.
This article explores the transmission effects of fiscal and credit policies on investment by renewable energy enterprises using a generalized method of moments model applied to enterprise-level panel data. Our empirical results demonstrate that subsidies and taxation rebates received from central and local governments have significantly positive impacts on renewable energy enterprises' investment efficiency. Short-run, long-run, and total credit loans obtained from financial institutions have significantly positive impacts on renewable energy enterprises' investment. Subsidies and credit loans and taxation rebates and credit loans represent significantly positive interactions on renewable energy enterprises' investment. Variations in subsidies, taxation rebates, and credit loans induce interactions to become more sensitive. Overall, the results demonstrate that fiscal and credit policies are able to effectively incentivize renewable energy enterprises to invest in more profitable renewable energy projects and then enhance investments in tangible assets.
The whole community have paid a lot of attention to whether China can achieve its emission target. The paper adds to the existing literature on emission forecast by considering consumption preference, knowledge capital and technological innovation mechanism with in a non-linear multi-agent intertemporal optimization model (NL-MIOM) which can further improve the accuracy of CO2 emission prediction. The historical fitting test shows that the MAPE value of NL-MIOM model is 1.81%, which is lower than the GM, NGM, ARIMA, OGM, SVR and BR-AGM models. By using this model, we forecast the CO2 emissions and energy consumption structure in China under different scenarios from 2018-2035. We find that China's CO2 emissions will peak around 2032, 2029 or 2027 with 12.34, 11.59 or 11.17 billion tons CO2 emissions under the benchmark scenario, Preference A (American consumption preference) scenario and Preference B (Japanese consumption preference) scenario. Based on the methodology of LMDI decomposition, we identify the main factors affecting China’s CO2 emissions. The results show that the technical progress is the main reason for the reduction of CO2 emissions in the historical stage, pre-peak stage and post-peak stage. Moreover, we also forecast the energy use of 14 different industries in China under different scenarios.
This paper evaluates the welfare impacts of carbon taxation on South African households. Using household survey data for the period 2009–2015, I estimate the Quadratic Almost Ideal Demand System (QUAIDS) model to obtain elasticities and use them to simulate consumer responses to price changes resulting from carbon taxation. Results show that an increase in electricity and public transport prices following a carbon tax policy is regressive while a price increase in motor fuel is progressive. In addition, when there is a simultaneous increase in the prices of energy goods, the poorest and middle income households disproportionately suffer a higher welfare loss compared to the richest households. I also show that income is important in determining whether rural households experience a higher or lower welfare loss than urban households. Furthermore, revenue recycling in terms of lump-sum transfers of the tax revenue to households below the national poverty lines and the bottom 40% would offset the welfare loss from a carbon tax policy in South Africa.
Based on the Over Lapping Generation Model, this paper concerns the impact of environmental pollution and residents' health status on economic activities, and analyzes the relationship between tax revenue distribution proportion, economic activities and residents' social welfare. Through modeling, health welfare is introduced into welfare function, and time allocation proportion is introduced into health function and consumption budget. It is proved that the level of economic output and social welfare level can simultaneously optimal. Given the tax rate, we explore the optimal allocation ratio of carbon tax revenue when the per capita output of the economic steady-state equilibrium is optimal and the social welfare of the residents is optimal. Moreover, the evolutionary relationship among spillover effect, transfer payment, carbon tax, etc. is revealed. The stability analysis of qualitative conclusion is carried out and corresponding policies are put forward. It is proved that the optimal point of health welfare spillover effect exists. Then, under the steady-state equilibrium, in this paper the optimal effect of health welfare spillover is obtained.
Based on the Cournot dual-oligonucleotide head model, this paper studies the Impact of carbon emission rights on Enterprises Based on Nash Equilibrium. The following finds analytical expressions of production enterprises’ output changes to analyze the impact of enterprises. As a result, it was found that the distribution of carbon emission rights would damage consumers’ rights and interests. In addition, some sufficient conditions for the historical emission law to affect producers’ residual changes in the carbon emissions trading system are also discussed.
Analyzing the effect of local government decision‐making competition on regional carbon emissions is important for reducing carbon emissions in rapidly urbanizing areas. Taking the energy rebound effect into account, this study analyzes the effect on carbon emissions of competition between local governments in decision making. Focusing on China's three urban agglomerations, this study further discusses how to avoid this influence. The results show that local government decision‐making competition is one of the main causes of the regional “green paradox”; the effect of local government decision‐making competition on carbon emissions has significant regional heterogeneity and spatial dependence, and the short‐term energy rebound effect is greater than the long‐term energy rebound effect; and local government decision‐making competition has three effects on carbon emissions that also have interaction and substitution effects between them: factor market distortion, investment bias, and the “race to the bottom” of environmental policies. However, four measures can reduce the effect of local government decision‐making competition on carbon emissions: one, improving the performance evaluation system of local governments; two, promoting the marketization of factor prices; three, improving both the energy efficiency and upgrading of industrial structures; and four, introducing macro emission reduction policies that allow the central government to intervene directly.
This study aims to fill a gap in the literature by examining the impacts of an emissions trading scheme (ETS) in Vietnam, as the policy has been discussed for a decade in the country but the likely impacts on the economy and different sectors are still unidentified. The simulations are carried out in a global energy computable general equilibrium (CGE) model, an extension of the GTAP-E model, which treats Vietnam as a country region. Results show that restricting the number of industrial sectors in the emissions trading market substantially affects the country's economy with a decline in real GDP by 4.57%. However, the country experiences much smaller adverse impacts (e.g., real GDP declines by 1.78%) when all industries participate in the emissions trading market. In either case of the ETS design, the coal mining, manufacturing, transportation, and electricity sectors are highly adversely affected; however, the crude oil and natural gas extraction sectors would experience expansion in their production levels due to substitutions for coal. In general, under the policy the emission levels from burning fossil fuels decline at significant rates, particularly from the electricity generation sector.
Existing literature mainly focuses on the combined effect of different policies on energy, economy and environment. However, most of them were based on the perspective of energy demand-side. In order to fill this gap, we study the effect of carbon tax and coal capacity cut from both the energy demand-side and energy supply-side using a dynamic Computable General Equilibrium (CGE) model. Different policy effects including single one and synergistic one are compared. Moreover, the synergy degrees of coal capacity cut and carbon tax in energy saving, emission reduction and economic growth are evaluated. The results show that both coal capacity cut and carbon tax are beneficial to energy conservation and carbon emission mitigation at the expense of a slight loss in economy. Mixed policy has better performance than single policy in carbon emission reduction and energy saving. Also, a more stringent policy is conducive to carbon emission mitigation and energy conservation. Additionally, there are significant synergistic effect of coal capacity cut and carbon tax from the perspectives of energy saving, emission reduction and economic growth. Therefore, the mixed policy of coal capacity cut and carbon tax should be promoted and an appropriate stringency level of policy mix should be adopted.
This article constructs and estimates a multi-area dynamic stochastic general equilibrium model with a spatial simultaneous equation. Taking Beijing-Tianjin-Hebei region in China as an example, we explain the dynamic effect of environmental expenditure shock and its spillover effects. Environmental expenditure has an obvious crowding-out effect on consumption and investment in local area, but has some positive influences on the economy of external regions. Over the business cycle, environmental expenditure shock in local area can well explain the volatility of real output and social investment in the last 52 quarters. However, environmental expenditure shocks in external regions have little contribution to the volatility of output and investment in local area. One interesting result is that the contribution of environmental expenditure shocks in external regions to the trend of pollution fluctuation is greater than that in local area.
Studying the impact of a carbon tax on household demand can be relevant in terms of securing public acceptance of a carbon tax and clarifying the implications for policy design. This paper aims to fill a gap in the academic literature by simulating carbon tax scenarios and estimating distributional effects of the tax on household welfare, income inequality, and poverty rates based on household consumption in Thailand. The study employs a microsimulation model incorporating the economy-wide effects of the tax on prices and consumers’ behavioral responses to changes in prices. The results indicate that a carbon tax is progressive in Thailand under revenue-recycling scenarios by expanding social transfer programs. When carbon tax revenues are recycled through pensions for elderly people, the carbon tax could reduce the poverty rate and improve the welfare of households in the lowest quintile. The results imply that the distributional impacts of environmental taxes could result in favorable outcomes for income inequality and poverty reduction in developing countries.
The characteristics of high emissions and high energy consumption in metallurgical industry have brought great challenges to the green and low carbon transition in China. As a low-carbon economic instrument, carbon tax is generally considered to be an effective way to reduce CO2 emissions through raising energy cost, but whether it will promote the green total factor productivity (GTFP) of China's metallurgical industry is still unanswered. Under this background, this paper uses provincial panel data over years 2000–2015 to investigate the impact of carbon taxation on GTFP of metallurgical industry from the perspective of inter-fuel and inter-factor substitution. The lock-in mechanism is also incorporated in the three-stage estimation model to better reflect the asymmetric price response of factors and fuels. The results reveal that the slow marketization process of energy price and the rigid demand for energy in China's metallurgical industry hinder the substitution effect of energy. The implementation of carbon tax has limited effect on energy-saving and CO2 reduction in the metallurgical industry of China and levying a carbon tax has a negative effect on GTFP during the research period. Therefore, the government should not achieve CO2 reduction targets at the expense of green economic growth. GTFP is suggested to be considered in future assessment criteria in the process of transforming to low-carbon economy.
This paper simulates the medium- and long-term impact of proposed and expected energy policy on the environment and on the Mexican economy. The analysis has been conducted with a Multi-sector Macroeconomic Model for the Evaluation of Environmental and Energy policy (Three-ME). This model is well suited for policy assessment purposes in the context of developing economies as it indicates the transitional effects of policy intervention. Three-ME estimates the carbon tax required to meet emissions reduction targets within the Mexican “Climate Change Law”, and assesses alternative policy scenarios, each reflecting a different strategy for the recycling of tax revenues. With no compensation, the taxation policy would reduce CO2 emissions by more than 75% by 2050 with respect to Business as Usual (BAU), but at high economic costs. Under full redistribution of carbon tax revenues, a double dividend arises: the policy appears beneficial both in terms of GDP and CO2 emissions reduction.
Widespread malnutrition in developing countries calls for appropriate strategies, presupposing good knowledge about nutritional impacts of policies. Little previous work has been carried out in this direction, especially with respect to micronutrients. We use representative household data from Malawi and develop a demand systems approach to estimate income and price elasticities of food demand and nutrient consumption. These estimates are applied for policy simulations. Given multiple nutritional deficiencies, income-related policies are better suited than price policies to improve nutrition. While consumer price subsidies for maize improve calorie and mineral consumption, they can worsen vitamin consumption in urban areas.
The authors evaluate the case for carbon taxes in terms of national interests. They reach the following conclusions. (A) A global carbon tax involves issues of international resource transfers and would be difficult to administer and enforce. It is thus unlikely to be implemented in the near future. (b) National carbon taxes can raise significant revenues cost-effectively in developing countries and are not likely to be as regressive in their impact as commonly perceived. Such taxes can also enhance economic efficiency if introduced as a revenue-neutral partial replacement for corporate income taxes or in cases where subsidies are prevalent. The welfare costs of carbon taxes generally vary directly with the existing level of energy taxes, so a carbon tax should be an instrument of choice for countries such as India and Indonesia, which have few or no energy taxes. A carbon tax can significantly reduce local pollution and carbon dioxide emissions. Cost-benefit analysis shows countries with few or no energy taxes substantially gaining from carbon taxes in terms of an improved local environment. A carbon tax of $10 a ton produces very small output losses for Pakistani industries analyzed in this paper, and the output losses are fully offset by health benefits from reduced emissions of local pollutants - even ignoring the global implications of a reduced greenhouse effect. Tradable permits are preferable to carbon taxes where the critical threshold of the stock of carbon emission beyond which temperatures would rise exponentially is known. Given our current ignorance on the costs of reducing carbon emissions and the threshold effect, a carbon tax appears to be a better and more flexible instrument for avoiding large unexpected costs.
This paper revisits the long-standing issue of the incidence of taxes in developing countries. Its central theme is that despite many decades of studies, tax incidence analyses for developing countries continue to be based upon the same shifting assumptions used in developed country studies, despite some obvious pitfalls. Taxes are assumed to be shifted forward to consumers, or backwards onto factor incomes, as has been the case for developed country tax incidence work from Bowley and Stamp to Peclunan and Okner. Developing countries typically have a much different non-tax policy and regulatory environment from developed countries, v i t a higher protection, rationed foreign exchange, price controls, black markets, credit rationing and many other features. The paper argues :::a: all these features can greatly complicate and even obscure the incider.ce effects of taxes in developing countries. For several taxes, taking such features into account can reverse signs and/or substantially revise estimates of incidence effects from conventional thinking and by substantial orders of magnitude. A final section sets out s orae implications for country lending programs, both by type of country and level of development, and c cnment;s on how the extent to which non-tax policy reform has already been implemented affects the significance of the points raised here.
With the recent jump in world oil prices, the issue of petroleum product pricing has become increasingly important in developing countries. Reflecting a reluctance of many governments to pass these price increases onto energy users, energy price subsidies are absorbing an increasing share of scarce public resources. This paper identifies the issues that need to be discussed when analyzing the fiscal and social costs of fuel subsidies. Using examples from analyses recently undertaken for five countries, it also identifies the magnitude of consumer subsidies and their fiscal implications. The results of the analysis show that-in all of these countries-energy subsidies have significant social and fiscal costs and are badly targeted.
Mexico recently declared ambitious goals in reducing domestic CO2 emissions and introduced a carbon tax in 2014. Although negative effects on household welfare and related poverty measures are widely discussed as possible consequences, empirical evidence is missing. We try to fill this gap by simulating an input-output model coupled with household survey data to examine the welfare effects of different carbon tax rates over the income distribution. The currently effective tax rate is small and has negligible effects on household welfare. Higher simulated tax rates, maintaining the current tax base, show a slight progressivity but welfare losses remain moderate. Welfare losses, regressivity and poverty rise more with widening the tax base towards natural gas and the other greenhouse gases methane (CH4) and nitrous oxide (N2O) mainly through food price increases. For a complete analysis of the policy, we simulate a redistribution of calculated tax revenues and find that the resulting effects become highly progressive, also for high rates, wider tax bases and even in the absence of perfect targeting of social welfare programs.
This paper presents a microsimulation using data from the National Households Income and Expenditure Survey (NHIES) from 1994 to 2010 to determine the distributional effects of the price changes arising from energy and environmental policies and their impact on Mexican households.
We reported simulations of several changes in energy prices as a result of partial or total energy subsidy removal, including carbon tax. In order to examine whether the subsidy mechanism and carbon tax tend to be progressive or regressive, we evaluated the households' burden in different income levels.
These simulations respond to the need for an assessment of economic and environmental impacts of energy subsidies in Mexico. This is of great importance for Mexico because of effort that has been taken in the development of energy policies, and the rising interest of the Mexican government in mitigating carbon dioxide (CO2) emissions and their concomitant environmental damage.
By using estimates from a Demographically-Scaled Quadratic Almost Ideal Demand System (DQUAIDS), we investigate how the German car fuels tax changes the private households’ CO2 emissions, living standards, and post-tax income distribution. Our results show that the tax implies a trade-off between the aim to reduce emissions and vertical equity, which refers to the idea that people with a greater ability to pay taxes should pay more.
This paper offers new evidence concerning the difference in consumers’ reactions to changes in gasoline taxes relative to market-induced changes in gasoline prices. Using microdata from the 2007 to 2009 rounds of the U.S. Consumer Expenditure Survey, we estimate a complete system of demand augmented with information on gasoline excise taxes. By relying on a complete system of demand, we are able to estimate elasticities that take behavioral responses into account. Crucially, the model allows gasoline taxes to affect demand in two distinct ways: through relative prices and as long-run policy signals. Different increases in gasoline taxes are considered for simulation. A 13.2 ¢/gallon tax increase, corresponding to a $15/tCO2 carbon tax, is found to cause, in the long run, a reduction in gasoline demand that is about seven times as big as that induced by an equal market-induced price increase. The same measure of differential demand response is derived for tax increases different in size as well as by income quintile and by region. We discuss the implications of our findings for the design of corrective taxation in the private transport sector.
Fuel Taxes and the Poor challenges the conventional wisdom that gasoline taxation, an important and much-debated instrument of climate policy, has a disproportionately detrimental effect on poor people. Increased fuel taxes carry the potential to mitigate carbon emissions, reduce congestion, and improve local urban environment. As such, higher gasoline taxes could prove to be a fundamental part of any climate action plan. However, they have been resisted by powerful lobbies that have persuaded people that increased fuel taxation would be regressive. Reporting on examples of over two dozen countries, this book sets out to empirically investigate this claim. The authors conclude that while there may be some slight regressivity in some high-income countries, as a general rule, fuel taxation is a progressive policy particularly in low income countries. Rich countries can correct for regressivity by cutting back on other taxes that adversely affect poor people, or by spending more money on services for the poor. Meanwhile, in low-income countries, poor people spend a very small share of their money on fuel for transport. Some costs from fuel taxes may be passed on to poor people through more expensive public transportation and food transport. Nevertheless, in general the authors find that gasoline taxes become more progressive as the income of the country in question decreases. This book provides strong arguments for the proponents of environmental taxation. It has immediate policy implications at the intersection of multiple subject areas, including transportation, environmental regulation, development studies, and climate change. Published with Environment for Development initiative. © 2012 Thomas Sterner for selection and editorial matter; individual contributors for their contributions.
This paper evaluates a large-scale appliance replacement program in Mexico that from 2009 to 2012 helped 1.9 million households replace their old refrigerators and air conditioners with energy-efficient models. Using household-level billing records from the universe of Mexican residential customers, we find that refrigerator replacement reduces electricity consumption by 8 percent, about one-quarter of what was predicted by ex ante analyses. Moreover, we find that air conditioning replacement actually increases electricity consumption. Overall, we find that the program is an expensive way to reduce externalities from energy use, reducing carbon dioxide emissions at a program cost of over $500 per ton.
This paper studies the equity effects of energy and carbon taxes, as policy instruments to reduce greenhouse gas emissions and fulfil the legally binding reduction targets adopted in the 1997 Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC). The equity effects of taxes on energy products are studied in the broader context of a revenue neutral environmental fiscal reform. The paper shows that carbon or energy taxes are mildly regressive and that impacts on low-income households are less than expected. The distributional implications depend on various issues, such as whether the type of fuel being taxed (heating, transport) and in particular how the revenues are recycled back to the economy. The importance of compensation and mitigation measures is also discussed.
In this study, I develop an analytical general equilibrium model to assess the distributional effects across income groups of a carbon tax assuming that the revenue from the carbon tax is recycled in two different ways: as a manufacturing tax-cut and a food subsidy. I use this analytical model to provide intuition about the main distributional components. The model is calibrated with data from Mexico to obtain unambiguous price and quantity changes. I find that the distribution of the costs is driven by the way the revenue is recycled. In particular, the costs are distributed regressively when the revenue is recycled as a manufacturing tax cut and progressively when it is recycled as a food subsidy. Providing a food subsidy also generates higher welfare and lower carbon emissions than the manufacturing tax cut. To compare and test the robustness of the numerical findings for Mexico, I calibrate the model with data for a developed country, specifically the U.S.A. Despite differences in the magnitude of the changes in some variables, the general findings mentioned above also hold for U.S.A. data. These results suggest that, as found for the U.S.A. in recent studies, carbon taxes are not necessarily regressive. Rather, the way revenue is recycled is a major determinant of how the carbon tax costs are distributed.
As the Kyoto Protocol winds down without a strong replacement, countries are implementing their own strategies to reduce global warming.
This paper reviews evidence on the impact of fuel subsidy reform on household welfare in developing countries. On average, the burden of subsidy reform is neutrally distributed across income groups; a $0.25 decrease in the per liter subsidy results in a 6 percent decrease in income for all groups. More than half of this impact arises from the indirect impact on prices of other goods and services consumed by households. Fuel subsidies are a costly approach to protecting the poor due to substantial benefit leakage to higher income groups. In absolute terms, the top income quintile captures six times more in subsidies than the bottom. Issues that need to be addressed when undertaking subsidy reform are also discussed, including the need for a new approach to fuel pricing in many countries.
A consistent two-step estimation procedure is proposed for a system of equations with limited dependent variables. Monte Carlo simulation results suggest the procedure outperforms an existing two-step method. Copyright 1999, Oxford University Press.
Fuel taxes have returned to centre stage as a potential policy instrument for greenhouse gas abatement. On the basis of some studies in developed countries, critics have complained that a fuel tax would be regressive. This paper uses data from a representative household survey covering more than 124 thousand Indian households to examine this claim. It finds that a fuel tax would be progressive as would a carbon tax. Using an input–output approach, it is found that the progressivity results holds good even when one considers indirect consumption of fuel through its use as an intermediate input. Sensitivity checks allowing for differing price elasticities of demand between rich and poor confirm this result for most of fuels. A tax on kerosene is the only fuel tax that is regressive in all situations.
We invent Implicit Marshallian demands, which combine desirable features of Hicksian and Marshallian demands. We propose and estimate the Exact Affine Stone Index (EASI) implicit Marshallian demand system. Like the Almost Ideal Demand (AID) system, EASI budget shares are linear in parameters given real expenditures. However, unlike the AID, EASI demands can have any rank and its Engel curves can have any shape over real expenditures. EASI error terms equal random utility parameters to account for unobserved preference heterogeneity. EASI demand functions can be estimated using GMM or three stage least squares, and, like AID, an approximate EASI model can be estimated by linear regression. (JEL D11, D12)
This paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to provide a detailed welfare analysis of shifts in relative prices. A nonparametric analysis of consumer expenditure patterns suggests that Engel curves require quadratic terms in the logarithm of expenditure. While popular models of demand such as the Translog or the Almost Ideal Demand Systems do allow flexible price responses within a theoretically coherent structure, they have expenditure share Engel curves that are linear in the logarithm of total expenditure. We derive the complete class of integrable quadratic logarithmic expenditure share systems. A specification from this class is estimated on a large pooled data set of U.K. households. Models that fail to account for Engel curvature are found to generate important distortions in the patterns of welfare losses associated with a tax increase. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
Analyzing the distributional impacts of economic crises is an ever more pressing need. If policymakers are to intervene to help those most adversely affected, they need to identify those who have been hurt most and estimate the magnitude of the harm they have suffered. They must also respond in a timely manner. This article develops a simple methodology for measuring these effects and applies it to analyze the impact of the Indonesian economic crisis on household welfare. Using only pre-crisis household information, it estimates the compensating variation for Indonesian households following the 1997 Asian currency crisis and then explores the results with flexible nonparametric methods. It finds that virtually every household was severely affected, although the urban poor fared the worst. The ability of poor rural households to produce food mitigated the worst consequences of the high inflation. The distributional consequences are the same whether or not households are permitted to substitute toward relatively cheaper goods. The geographic location of the household matters even within urban or rural areas and household income categories. Households with young children may have suffered disproportionately large adverse effects. Copyright 2002, Oxford University Press.
The main objective of this paper is to analyse consumer response due to changes in energy or environmental policy. To achieve the objective we for-mulate and estimate an econometric model for non-durable consumer demand in Sweden that utilises micro- as well as macro-data. The micro-economic model is conditional on male and female labour supply. A 100 percent increase of the Swedish CO2 tax will, according to the simulations, result in an increased tax payment of SEK 630 or 0.7 percent of disposable income for the households with the lowest disposable incomes. The corre-sponding numbers for the richest households are SEK 990 and 0.3 percent.
Voluntary approaches have become a popular in the U.S. to enhance the efficacy and scope of existing regulations and to reduce emissions in sectors or for pollutants where formal environmental regulation is lacking. In this paper, we examine the effectiveness of a particular EPA voluntary program for the metal finishing industry, the Strategic Goals Program (SGP). The Strategic Goals Program is a good candidate for evaluation because it had a credible regulatory threat at the time the program was implemented, we can measure both baseline emissions and progress towards explicit environmental goals, and we have data for participants and non-participants. We look at the decision to participate in the SGP and also try to determine what effect, if any, this program has had on the pollution profile of facilities. In addition, we examine whether the voluntary program had any discernible impact on toxicity-weighted emissions. Finally, we explore the possibility that we have a bimodal distribution in the sample caused by the different motivations of facilities to join a voluntary program. A number of factors influence a firm’s decision to participate in SGP, including trade group membership. However, we do not find robust evidence that SGP participation has had a significant impact on emission reductions. This result continues to hold when we adjust emissions to account for toxicity. Our measure of the threat of regulation is correlated with emission reductions for both participants and non-participants.
This paper constructs a model of saving for retired single people that includes heterogeneity in medical expenses and life expectancies, and bequest motives. We estimate the model using Assets and Health Dynamics of the Oldest Old data and the method of simulated moments. Out-of-pocket medical expenses rise quickly with age and permanent income. The risk of living long and requiring expensive medical care is a key driver of saving for many higher-income elderly. Social insurance programs such as Medicaid rationalize the low asset holdings of the poorest but also benefit the rich by insuring them against high medical expenses at the ends of their lives. (c) 2010 by The University of Chicago. All rights reserved..
The exact measurement of the welfare costs of tax and price reform requires a detailed knowledge of individual preferences. Typically, first-order approximations of welfare costs are calculated avoiding detailed knowledge of substitution effects. The authors derive second-order approximations which, unlike first-order approximations, require knowledge of the distribution of substitution elasticities. This paper asks to what extent simple approximations can be used to measure the welfare costs of tax reform and evaluates the magnitude of the biases for a plausible size tax reform. In the authors' empirical examples, first-order approximations display systematic biases; second-order approximations always work well. Copyright 1996 by Royal Economic Society.
The Distributional Effects of Energy Taxes
- F Flues
- A Thomas
Flues, F., Thomas, A., 2015. The Distributional Effects of Energy Taxes. OECD Taxation
Working Papers.
Fossil Fuel Subsidy Reform in Mexico and Indonesia
IEA, 2016. Fossil Fuel Subsidy Reform in Mexico and Indonesia. Organisation for
Economic Co-operation and Development, Paris.
A residential energy demand system for Spain
- X Labandeira
- J M Labeaga
- M Rodrguez
Labandeira, X., Labeaga, J.M., Rodrguez, M., 2006. A residential energy demand system
for Spain. Energy J. 27 (2), 87-111. Apr.
The theory of optimal commodity and income taxation. The Theory of Taxation for Developing Countries
- N Stern
Stern, N., 1987. The theory of optimal commodity and income taxation. The Theory of
Taxation for Developing Countries. Oxford University Press.
Carbon taxes, consumer demand and carbon dioxide emissions: a simulation analysis for the UK
- E Symons
- J Proops
- P Gay
Symons, E., Proops, J., Gay, P., 1994. Carbon taxes, consumer demand and carbon dioxide emissions: a simulation analysis for the UK. Fisc. Stud. 15 (2), 19-43. https://
doi.org/10.1111/j.1475-5890.1994.tb00195.x/abstract. May.
An illustrated user guide to the world input-output database: the case of global automotive production
- M P Timmer
- E Dietzenbacher
- B Los
- R Stehrer
- G J De Vries
Timmer, M.P., Dietzenbacher, E., Los, B., Stehrer, R., de Vries, G.J., 2015. An illustrated
user guide to the world input-output database: the case of global automotive
production. Rev. Int. Econ. 23 (3), 575-605. https://doi.org/10.1111/roie.12178/
abstract. Aug.
Household demand for fats and oils: two-step estimation of a censored demand system
- S T Yen
- K Kan
- S.-J Su
Yen, S.T., Kan, K., Su, S.-J., 2002. Household demand for fats and oils: two-step estimation of a censored demand system. Appl. Econ. 34 (14), 1799-1806. http://www.
tandfonline.com/doi/abs/10.1080/00036840210125008. Sep.