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On the Nexus Between Fiscal Policies and Sustainable Development

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  • Ramón E. López
  • Eugenio Figueroa B.

Abstract

This paper hypothesizes that fiscal policy is one important factor determining whether or not environmentally and socially sustainable economic growth is possible. We postulate that tax policies affect the incentives to make the economy more or less dependent on natural resources and the environment as factors of production. So‐called pro‐growth tax policies consisting of a low tax burden, low direct taxes but high indirect ones, affect the composition of factor endowment, often inducing overinvestment in physical capital and underinvestment in human capital, including education and health. These policies in part explain a structure of production heavily dependent on natural‐resource‐based and environmentally dirty industries. Moreover, these tax policies induce high levels of inequality, which ultimately may render economic growth socially and politically unsustainable. This analysis has important implications for Chile and for other developing countries, especially in Latin America, which are highly dependent on natural resources and have highly unequal income distributions. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment

Suggested Citation

  • Ramón E. López & Eugenio Figueroa B., 2016. "On the Nexus Between Fiscal Policies and Sustainable Development," Sustainable Development, John Wiley & Sons, Ltd., vol. 24(4), pages 201-219, July.
  • Handle: RePEc:wly:sustdv:v:24:y:2016:i:4:p:201-219
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    Cited by:

    1. Yigang Wei & Yan Li & Meiyu Wu & Yingbo Li, 2020. "Progressing sustainable development of “the Belt and Road countries”: Estimating environmental efficiency based on the Super‐slack‐based measure model," Sustainable Development, John Wiley & Sons, Ltd., vol. 28(4), pages 521-539, July.
    2. Kayode Olaide & Beatrice D. Simo-Kengne & Josine Uwilingiye, 2022. "Sustainable Development–Fiscal Federalism Nexus: A “Beyond GDP” Approach," Sustainability, MDPI, vol. 14(10), pages 1-37, May.
    3. Mardones, Cristian & del Rio, Ricardo, 2019. "Correction of Chilean GDP for natural capital depreciation and environmental degradation caused by copper mining," Resources Policy, Elsevier, vol. 60(C), pages 143-152.
    4. Gökçer Özgür & Ceyhun Elgin & Adem Y. Elveren, 2021. "Is informality a barrier to sustainable development?," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(1), pages 45-65, January.
    5. Muhammad Athar Nadeem & Zhiying Liu & Haji Suleman Ali & Amna Younis & Muhammad Bilal & Yi Xu, 2020. "Innovation and Sustainable Development: Does Aid and Political Instability Impede Innovation?," SAGE Open, , vol. 10(4), pages 21582440209, November.
    6. Eugenio Figueroa & Ramón E. López & Gino Sturla, 2019. "Efficient Water Allocation when Climate is Changing: An interdisciplinary approach," Working Papers wp489, University of Chile, Department of Economics.
    7. Simón Accorsi & Gino Sturla, "undated". "Una Estimación de la Renta Económica en el Mercado de las Isapres en Chile," Working Papers wp491, University of Chile, Department of Economics.

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