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Vietnam's New Environmental Tax Law: What Will It Cost? Who Will Pay?

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  • Coxhead, Ian

    (University of WI)

  • Chan, Nguyen Van

    (National Economics University, Hanoi)

Abstract

We examine the effects of a proposed environmental tax in a small open developing economy, using an applied general equilibrium model linked to a household survey database. The burden of the tax, applied primarily to fossil fuels, is passed forward by non-traded industries and backward by industries selling into the world market. It causes efficiency and competitiveness losses equivalent to those of a real exchange rate appreciation, and since export industries are in general highly labor-intensive, is regressive and thus poverty-increasing. The budget-neutral use of increased tax revenues to raise spending on anti-poverty programs can offset most of the losses of poor households, but does not create new jobs. The extent of overall losses and their distribution is sensitive to some parameters, such as labor supply response, about which little is currently known in a developing-country context.

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Bibliographic Info

Paper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number 561.

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Date of creation: Aug 2011
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Handle: RePEc:ecl:wisagr:561

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  1. Don Fullerton & Garth Heutel, 2005. "The General Equilibrium Incidence of Environmental Taxes," NBER Working Papers 11311, National Bureau of Economic Research, Inc.
  2. Arief Anshory Yusuf, 2008. "The Distributional Impact of Environmental Policy: The Case of Carbon Tax and Energy Pricing Reform in Indonesia," EEPSEA Research Report, Economy and Environment Program for Southeast Asia (EEPSEA) rr2008101, Economy and Environment Program for Southeast Asia (EEPSEA), revised Oct 2008.
  3. World Bank, 2010. "World Development Report 2010," World Bank Publications, The World Bank, number 4387, August.
  4. Willenbockel, Dirk, 2011. "Environmental tax reform in Vietnam: An ex ante general equilibrium assessment," MPRA Paper 44411, University Library of Munich, Germany.
  5. Ian Parry & Hilary Sigman & Margaret Walls & Roberton Williams, 2005. "The Incidence of Pollution Control Policies," Departmental Working Papers, Rutgers University, Department of Economics 200504, Rutgers University, Department of Economics.
  6. Sahn, David E. & Alderman, Harold, 1988. "The effects of human capital on wages, and the determinants of labor supply in a developing country," Journal of Development Economics, Elsevier, Elsevier, vol. 29(2), pages 157-183, September.
  7. repec:reg:wpaper:205 is not listed on IDEAS
  8. Datta, Ashokankur, 2010. "The incidence of fuel taxation in India," Energy Economics, Elsevier, Elsevier, vol. 32(Supplemen), pages S26-S33, September.
  9. repec:reg:rpubli:205 is not listed on IDEAS
  10. W. Jill Harrison & K.R. Pearson, 1994. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Centre of Policy Studies/IMPACT Centre Working Papers ip-64, Victoria University, Centre of Policy Studies/IMPACT Centre.
  11. Ian Coxhead, 2000. "Tax Reform and the Environment in Developing Economies: Is a Double Dividend Possible," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 431, Wisconsin-Madison Agricultural and Applied Economics Department.
  12. Cooper, Richard N., 2000. "Trade and the environment," Environment and Development Economics, Cambridge University Press, vol. 5(04), pages 483-529, October.
  13. Jensen, Henning Tarp & Tarp, Finn, 2007. "A Vietnam Social Accounting Matrix (SAM) for the Year 2003," MPRA Paper 29822, University Library of Munich, Germany.
  14. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers, Institute for Fiscal Studies W98/18, Institute for Fiscal Studies.
  15. Beghin, John C. & Roland-Holst, David & Van der Mensbrugghe, Dominique, 2002. "Trade and the Environment in General Equilibrium: Evidence from Developing Economies," Staff General Research Papers 4090, Iowa State University, Department of Economics.
  16. Abbott, Philip & Bentzen, Jeanet & Tarp, Finn, 2009. "Trade and Development: Lessons from Vietnam's Past Trade Agreements," World Development, Elsevier, Elsevier, vol. 37(2), pages 341-353, February.
  17. Elobeid, Amani & Van der Mensbrugghe, Dominique & Dessus, Sebastien, 2002. "Outward Orientation, Growth, and the Environment in Vietnam," Staff General Research Papers 4085, Iowa State University, Department of Economics.
  18. Phan, Diep & Coxhead, Ian, 2008. "Interprovincial Migration and Inequality During Vietnam's Transition," Staff Paper Series, University of Wisconsin, Agricultural and Applied Economics 507, University of Wisconsin, Agricultural and Applied Economics.
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