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Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices

  • Fullerton Don

    ()

    (University of Illinois at Urbana-Champaign)

  • Heutel Garth

    ()

    (The University of North Carolina at Greensboro)

Using an analytical general equilibrium model, we find solutions for the effect of energy policy on factor prices as well as output prices. We calibrate the model to the U.S. economy, and we consider a tax on carbon dioxide. By looking at expenditure and income patterns across household groups, we quantify the uses-side and sources-side incidence of the tax. When households are categorized either by annual income or by total annual consumption as a proxy for permanent income, the uses-side incidence is regressive. This result is robust to sensitivity analysis over various parameter values. The sources-side incidence can be progressive, U-shaped, or regressive. Results on the sources side are sensitive to parameter values.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2011)
Issue (Month): 2 (January)
Pages: 1-26

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Handle: RePEc:bpj:bejeap:v:10:y:2011:i:2:n:15
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  1. James M. Poterba, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," NBER Working Papers 2833, National Bureau of Economic Research, Inc.
  2. Kevin A. Hassett & Aparna Mathur & Gilbert E. Metcalf, 2007. "The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis," NBER Working Papers 13554, National Bureau of Economic Research, Inc.
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  7. Don Fullerton & Garth Heutel, 2007. "The General Equilibrium Incidence of Environmental Mandates," NBER Working Papers 13645, National Bureau of Economic Research, Inc.
  8. Peter M. Mieszkowski, 1970. "The Property Tax: An Excise Tax or a Profits Tax?," Cowles Foundation Discussion Papers 304, Cowles Foundation for Research in Economics, Yale University.
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