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Energy Policy and Regional Inequalities in the Brazilian Economy

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  • Gervásio F. Santos

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  • Eduardo A. Haddad, Geoffrey J. D. Hewings

Abstract

The objective of this paper is to evaluate the long-run regional impacts of the tariff policy of the Brazilian electric power sector. This sector has undergone a reform process started in the 1990’s. Since the beginning of the reform, two spatial trends of distribution of electric power tariffs have emerged among the Brazilian states; one of convergence and another of spatial divergence. These trends have been guided by the new electric power tariff policy and by the spatial features of the Brazilian economy, which is marked by high degree of spatial concentration and hierarchical distribution of large markets. In addition, because of the presence of strong economies of scale, the recent electric power prices differentials might be caused by differentials in market size, which provide better conditions for the achievement of economies of scale for electric power utility companies located in large markets. Based on the fact that electric power is an important intermediate input to the production process, and the economic sectors have input-output linkages among then, an Energy Interregional Computable General Equilibrium model was used to simulate the long-run regional impacts of electric power tariff policy in Brazil. The simulations showed that, the heterogeneity of energy-intensity and the differentials of energy substitution drive the spatial impacts of changes in electric power prices. On the other hand, the recent trend of spatial dispersion of electric power prices might contribute to decrease the long-run economic growth and to increase the regional inequalities in Brazil.

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File URL: http://www.fea.usp.br/feaecon/RePEc/documentos/Nereus092011.pdf
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Bibliographic Info

Paper provided by University of São Paulo (FEA-USP) in its series Working Papers, Department of Economics with number 2011_09.

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Date of creation: 13 Nov 2011
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Handle: RePEc:spa:wpaper:2011wpecon09

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Keywords: energy policy; regulation; spatial concentration; CGE modeling;

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  1. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  2. Faini, Riccardo, 1984. "Increasing Returns, Non-Traded Inputs and Regional Development," Economic Journal, Royal Economic Society, vol. 94(374), pages 308-23, June.
  3. Ramos-Real, Francisco Javier & Tovar, Beatriz & Iootty, Mariana & de Almeida, Edmar Fagundes & Pinto Jr., Helder Queiroz, 2009. "The evolution and main determinants of productivity in Brazilian electricity distribution 1998-2005: An empirical analysis," Energy Economics, Elsevier, vol. 31(2), pages 298-305, March.
  4. Philip D. Adams & Mark Horridge & Glyn Wittwer, 2003. "MMRF-GREEN: A Dynamic Multi-Regional Applied General Equilibrium Model of the Australian Economy, Based on the MMR and MONASH Models," Centre of Policy Studies/IMPACT Centre Working Papers g-140, Victoria University, Centre of Policy Studies/IMPACT Centre.
  5. T. R. Lakshmanan, 1981. "Regional Growth and Energy Determinants: Implications for the Future," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-24.
  6. Hanoch, Giora, 1971. "CRESH Production Functions," Econometrica, Econometric Society, vol. 39(5), pages 695-712, September.
  7. Carlos R. Azzoni, 2001. "Economic growth and regional income inequality in Brazil," The Annals of Regional Science, Springer, vol. 35(1), pages 133-152.
  8. Nijkamp, Peter & Perrels, Adriaan, 1988. "Impacts of electricity rates on industrial location," Energy Economics, Elsevier, vol. 10(2), pages 107-116, April.
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