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Environmental Taxes, Inefficient Subsidies and Income Distribution in Chile: A CGE framework

  • Raúl O'Ryan

    ()

  • Sebastian Miller
  • Carlos J. de Miguel

Successful economic growth followed by Chile, based on open market and export strategy, is characterised by a high dependence on natural resources, and by polluting production and consumption patterns. There is an increasing concern about the need to make potentially significant trade-offs between economic growth and environmental improvements. Additionally, policy-makers have been reluctant to impose standards that could have regressive consequences, making the poor poorer. Using the ECOGEM-Chile model we study the direct and indirect effects of imposing green taxes in Chile for PM10, SO2 and NOx as well as taxes on gasoline. We analyse the effects over macroeconomic variables as well as sectoral, distributive and environmental variables. We also analyse eliminating distotionary subsidies that produce environmental and welfare losses. Evidence of welfare gains, besides environmental gains, and trade-off among sectors is presented that can justify tax/subsidies reforms in developing countries, replacing inefficient taxes/subsidies for more efficient ones.

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File URL: http://www.dii.uchile.cl/~cea/sitedev/cea/www/download.php?file=documentos_trabajo/ASOCFILE120030404113211.pdf
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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 98.

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Date of creation: 2001
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Handle: RePEc:edj:ceauch:98
Contact details of provider: Web page: http://www.dii.uchile.cl/cea/

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  1. Mäler, Karl-Göran & Munasinghe, Mohan, 1996. "Macroeconomic policies, second-best theory and the environment," Environment and Development Economics, Cambridge University Press, vol. 1(02), pages 149-163, May.
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  11. Robinson, Sherman & Gehlhar, Clemen G., 1995. "Land, water, and agriculture in Egypt: the economywide impact of policy reform," TMD discussion papers 1, International Food Policy Research Institute (IFPRI).
  12. Ballard, Charles L. & Medema, Steven G., 1993. "The marginal efficiency effects of taxes and subsidies in the presence of externalities : A computational general equilibrium approach," Journal of Public Economics, Elsevier, vol. 52(2), pages 199-216, September.
  13. Hazilla, Michael & Kopp, Raymond J, 1990. "Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 853-73, August.
  14. Mukherjee, Natasha, 1996. "Water and land in South Africa: economywide impacts of reform a case study for the Olifants river," TMD discussion papers 12, International Food Policy Research Institute (IFPRI).
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  16. Parry, Ian & Oates, Wallace, 1998. "Policy Analysis in a Second-Best World," Discussion Papers dp-98-48, Resources For the Future.
  17. Nestor, Deborah Vaughn & Pasurka, Carl Jr., 1995. "Alternative specifications for environmental control costs in a general equilibrium framework," Economics Letters, Elsevier, vol. 48(3-4), pages 273-280, June.
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