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Vietnam's New Environmental Tax Law: What Will It Cost? Who Will Pay?

  • Coxhead, Ian

    (University of WI)

  • Chan, Nguyen Van

    (National Economics University, Hanoi)

We examine the effects of a proposed environmental tax in a small open developing economy, using an applied general equilibrium model linked to a household survey database. The burden of the tax, applied primarily to fossil fuels, is passed forward by non-traded industries and backward by industries selling into the world market. It causes efficiency and competitiveness losses equivalent to those of a real exchange rate appreciation, and since export industries are in general highly labor-intensive, is regressive and thus poverty-increasing. The budget-neutral use of increased tax revenues to raise spending on anti-poverty programs can offset most of the losses of poor households, but does not create new jobs. The extent of overall losses and their distribution is sensitive to some parameters, such as labor supply response, about which little is currently known in a developing-country context.

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Paper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number 561.

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Date of creation: Aug 2011
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Handle: RePEc:ecl:wisagr:561
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  1. repec:reg:rpubli:205 is not listed on IDEAS
  2. Elobeid, Amani & Van der Mensbrugghe, Dominique & Dessus, Sebastien, 2002. "Outward Orientation, Growth, and the Environment in Vietnam," Staff General Research Papers 4085, Iowa State University, Department of Economics.
  3. Ian Parry & Hilary Sigman & Margaret Walls & Roberton Williams, 2005. "The Incidence of Pollution Control Policies," Departmental Working Papers 200504, Rutgers University, Department of Economics.
  4. Arief Anshory Yusuf, 2008. "The Distributional Impact of Environmental Policy: The Case of Carbon Tax and Energy Pricing Reform in Indonesia," EEPSEA Research Report rr2008101, Economy and Environment Program for Southeast Asia (EEPSEA), revised Oct 2008.
  5. Beghin, John C. & Roland-Holst, David & Van der Mensbrugghe, Dominique, 2002. "Trade and the Environment in General Equilibrium: Evidence from Developing Economies," Staff General Research Papers 4090, Iowa State University, Department of Economics.
  6. Sahn, David E. & Alderman, Harold, 1988. "The effects of human capital on wages, and the determinants of labor supply in a developing country," Journal of Development Economics, Elsevier, vol. 29(2), pages 157-183, September.
  7. Phan, Diep & Coxhead, Ian, 2008. "Interprovincial Migration and Inequality During Vietnam's Transition," Staff Paper Series 507, University of Wisconsin, Agricultural and Applied Economics.
  8. Fullerton, Don & Heutel, Garth, 2007. "The general equilibrium incidence of environmental taxes," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 571-591, April.
  9. Abbott, Philip & Bentzen, Jeanet & Tarp, Finn, 2009. "Trade and Development: Lessons from Vietnam's Past Trade Agreements," World Development, Elsevier, vol. 37(2), pages 341-353, February.
  10. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  11. Willenbockel, Dirk, 2011. "Environmental tax reform in Vietnam: An ex ante general equilibrium assessment," MPRA Paper 44411, University Library of Munich, Germany.
  12. Cooper, Richard N., 2000. "Trade and the environment," Environment and Development Economics, Cambridge University Press, vol. 5(04), pages 483-529, October.
  13. World Bank, 2010. "World Development Report 2010," World Bank Publications, The World Bank, number 4387.
  14. Jensen, Henning Tarp & Tarp, Finn, 2007. "A Vietnam Social Accounting Matrix (SAM) for the Year 2003," MPRA Paper 29822, University Library of Munich, Germany.
  15. Datta, Ashokankur, 2010. "The incidence of fuel taxation in India," Energy Economics, Elsevier, vol. 32(Supplemen), pages S26-S33, September.
  16. Coxhead, Ian, 2000. "Tax Reform and the Environment in Developing Economies: Is a Double Dividend Possible," Staff Paper Series 431, University of Wisconsin, Agricultural and Applied Economics.
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