General equilibrium impact of an energy-saving policy in the public sector
AbstractWe analyse a disregarded environmental policy instrument: a switch in government expenditure away from energy (or other natural resources) and toward a composite good which includes energy-saving expenditure. We first develop two variants of an analytical general equilibrium model. A composite good is produced with constant returns to scale, and energy is imported or produced domestically with diminishing returns, yielding a differential rent to its owners. The government purchases energy and composite goods from private firms. Such a policy unambiguously increases employment. It also raises private consumption and welfare under two conditions: (i) it is not too costly and (ii) the initial share of the resource is smaller in public spending than in private consumption, or the difference is small enough. We then run numerically a model featuring both importation and domestic production of energy (oil, gas and electricity), for the OECD as a whole. Simulations show that employment, welfare and private consumption rise. We provide magnitudes for different parameter values.
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Date of creation: 2007
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Publication status: Published, Environmental and Resource Economics, 2007, 38, 2, 245-258
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Resource conservation; energy conservation; public spending; employment; general equilibrium; multi-sectors models;
Other versions of this item:
- Philippe Quirion & Meriem Hamdi-Cherif, 2007. "General equilibrium impact of an energy-saving policy in the public sector," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 38(2), pages 245-258, October.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
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