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Estimation of Macroeconomic Effects from the Decline in Oil Export Duty

Author

Listed:
  • Zubarev, Andrey V.

    () (the Centre for Economic Modeling of Energy and Environment of the Russian Presidential Academy of National Economy and Public Administration)

  • Polbin, Andrey V.

    () (the Centre for Economic Modeling of Energy and Environment of the Russian Presidential Academy of National Economy and Public Administration)

Abstract

The article studies macroeconomic effects of reducing oil export duty, depending on various development scenarios for oil refining sector and the implemented economic policy measures in the framework of neoclassical general equilibrium model for the Russian economy. Relevance of the work is based on the fact that oil export duty subsidises both oil refining industry, allowing it to exist in the market with low efficiency compared with foreign producers, and petroleum customers, which translates into a lower cost of petroleum products as compared to the world prices. Our paper mainly focuses on a comparison of the different effects of the tax manoeuvre on the abolition of oil export duty. The positive effects can arise from increase in the efficiency of the oil refining industry, which the abolition of export duty on crude oil should create incentives for. The negative effects on the economy are mainly related to the appreciation of the prices for the most important factors of production — oil and petroleum products, which can lead to a loss in competitiveness of Russian non-energy export. The transition process to the new efficient technologies is set exogenously in the model. It is expected that the abolition of oil export duty will force companies to carry out the modernisation of production process. In this case, we build scenarios with gradual reduction of tariffs in 5–7 years that should not lead to the collapse in the domestic petroleum products market in the short run due to the inability of certain enterprises rapidly switch to the new technologies. It is shown that in the current economic environment with low oil prices, this tax reform can be virtually painless for the economy. At the same time, if considered economic policy measure will force the oil refining industry to modernise its production facilities, there will be a positive effect on output in the economy and the welfare of domestic economic agents in the long run.

Suggested Citation

  • Zubarev, Andrey V. & Polbin, Andrey V., 2016. "Estimation of Macroeconomic Effects from the Decline in Oil Export Duty," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 8-35, December.
  • Handle: RePEc:rnp:ecopol:ep1661
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    References listed on IDEAS

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    More about this item

    Keywords

    oil export duty; tax reform; DSGE model for the Russian economy;

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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