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Input vs. output taxation - a DSGE approach to modelling resource decoupling

Author

Listed:
  • Marek Antosiewicz
  • Jan Witajewski-Baltvilks
  • Piotr Lewandowski

Abstract

Environmental taxes constitute a crucial instrument aimed at reducing resource use through lower production losses, resource-leaner products and more resource-efficient production processes. In this paper we focus on material use and apply a multisector DSGE model to study two types of taxation: tax on material inputs used by industry, energy, construction and transport sectors, and tax on output of these sectors. We allow for endogenous adaption of resource saving technologies. We calibrate the model for the EU27 area using IO matrix. We consider taxation introduced from 2021 and simulate its impact until 2050. We compare the taxes along their ability to induce reduction in material use and raise revenue. We also consider the effect of spending this revenue on reduction of labour taxation. We find that input and output taxation create contrasting incentives and have opposite effects on resource efficiency. The material input tax induces investment in efficiency improving technology which in the long term results in GDP and employment by 15-20% higher in comparison to comparable output tax. We also find that using revenues to reduce taxes on labour has stronger beneficial effects for the input tax.

Suggested Citation

  • Marek Antosiewicz & Jan Witajewski-Baltvilks & Piotr Lewandowski, 2016. "Input vs. output taxation - a DSGE approach to modelling resource decoupling," IBS Working Papers 02/2016, Instytut Badan Strukturalnych.
  • Handle: RePEc:ibt:wpaper:wp022016
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Input vs. output taxation – a DSGE approach to modelling resource decoupling
      by Christian Zimmermann in NEP-DGE blog on 2016-03-25 20:13:58

    Citations

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    Cited by:

    1. Doreen Fedrigo-Fazio & Jean-Pierre Schweitzer & Patrick ten Brink & Leonardo Mazza & Alison Ratliff & Emma Watkins, 2016. "Evidence of Absolute Decoupling from Real World Policy Mixes in Europe," Sustainability, MDPI, Open Access Journal, vol. 8(6), pages 1-22, May.
    2. repec:gam:jsusta:v:10:y:2018:i:1:p:229-:d:127397 is not listed on IDEAS
    3. Yevgeniya Arushanyan & Anna Björklund & Ola Eriksson & Göran Finnveden & Maria Ljunggren Söderman & Jan-Olov Sundqvist & Åsa Stenmarck, 2017. "Environmental Assessment of Possible Future Waste Management Scenarios," Energies, MDPI, Open Access Journal, vol. 10(2), pages 1-27, February.

    More about this item

    Keywords

    DSGE model; resource decoupling; technological change; environmental taxes; environmental policy; double dividend;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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