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Energy Tariffs, Production, and Income in a Small Open Economy

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  • Henry Thompson

Abstract

A tariff on imported energy in a small open economy alters production, redistributes income, and generates tariff revenue. The present paper includes tariff revenue in a general equilibrium economy producing two traded goods with imported energy and domestic capital and labor. An energy tariff reduces energy intensive output and domestic factor income but payment to one domestic factor may rise as might the other output. Tariff revenue, not included in the related theoretical literature, is shown to be concave in the tariff. A simulation illustrates these general equilibrium properties including the revenue maximizing tariff.

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Paper provided by Department of Economics, Auburn University in its series Auburn Economics Working Paper Series with number auwp2013-11.

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Date of creation: Aug 2013
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Handle: RePEc:abn:wpaper:auwp2013-11

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Keywords: Energy Tariffs; Tariff Revenue; General Equilibrium;

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  1. Thompson, Henry, 2006. "The applied theory of energy substitution in production," Energy Economics, Elsevier, vol. 28(4), pages 410-425, July.
  2. Berndt, Ernst R & Christensen, Laurits R, 1973. "The Internal Structure of Functional Relationships: Separability, Substitution and Aggregation," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 403-10, July.
  3. Weitzel, Matthias & Hübler, Michael & Peterson, Sonja, 2012. "Fair, optimal or detrimental? Environmental vs. strategic use of border carbon adjustment," Energy Economics, Elsevier, vol. 34(S2), pages S198-S207.
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  12. Henry Thompson, 1985. "Complementarity in a Simple General Equilibrium Production Model," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 616-21, August.
  13. Lloyd A. Metzler, 1949. "Tariffs, International Demand, and Domestic Prices," Journal of Political Economy, University of Chicago Press, vol. 57, pages 345.
  14. Jones, Clifton T., 1990. "An oil import fee and drilling activity in the USA : A comment," Energy Economics, Elsevier, vol. 12(4), pages 302-304, October.
  15. Panagariya, Arvind, 1992. "Input tariffs, duty drawbacks, and tariff reforms," Journal of International Economics, Elsevier, vol. 32(1-2), pages 131-147, February.
  16. Lars E.O. Svensson, 1982. "Factor Trade and Goods Trade," NBER Working Papers 0999, National Bureau of Economic Research, Inc.
  17. Griffin, James M & Gregory, Paul R, 1976. "An Intercountry Translog Model of Energy Substitution Responses," American Economic Review, American Economic Association, vol. 66(5), pages 845-57, December.
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