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Tax Reform and Energy in the Philippines Economy: A General Equilibrium Computation

Author

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  • Roy G. Boyd
  • Khosrow Doroodian
  • Prapassorn Udomvaech

Abstract

This paper examines how energy tax cuts, offset with income tax increases, affect production, consumption, and total welfare in the Philippines economy. Our results show that energy tax cuts expand the energy and nonmetal mining sectors, butdecrease output in the manufacturing, agricultural, andmetal mining sectors. Consumption of all goods and services combined increases as the amount of energy tax reduction increases. Our welfare results, however, are mixed. While the welfare of the mid- and high-income levels increases, that of the lowest income level decreases. These results are robust with respect to changes in the elasticity of substitution in energy production as well as the elasticity of substitution in consumer demand. From the standpoint of economic efficiency, a policy such as this would enhance growth and aggregate income. From an equity standpoint, however, this policy is highly regressive in spite of the fact that the richest households pay proportionately more to finance the energy tax reduction.

Suggested Citation

  • Roy G. Boyd & Khosrow Doroodian & Prapassorn Udomvaech, 1994. "Tax Reform and Energy in the Philippines Economy: A General Equilibrium Computation," The Energy Journal, , vol. 15(2), pages 135-155, April.
    • Handle: RePEc:sae:enejou:v:15:y:1994:i:2:p:135-155
    DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No2-8
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    References listed on IDEAS

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    2. Shoven, John B. & Whalley, John, 1972. "A general equilibrium calculation of the effects of differential taxation of income from capital in the U.S," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 281-321, November.
    3. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "Introduction to "A General Equilibrium Model for Tax Policy Evaluation"," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 1-5, National Bureau of Economic Research, Inc.
    4. Manasan, Rosario G., 1990. "An Assessment of Fiscal Policy in the Philippines, 1986-1988," Working Papers WP 1990-06, Philippine Institute for Development Studies.
    5. Manasan, Rosario G., 1989. "Employment Effects of Selected Structural Adjustment Policies in the Philippines," Working Papers WP 1989-04, Philippine Institute for Development Studies.
    6. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226036335, August.
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