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Taxation of intermediate goods: a CGE analysis
Örebro University, Swedish Business School at Örebro University.ORCID iD: 0000-0003-2241-6093
2010 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This dissertation is concerned with tax rates for the use of commodities in general, and energy in particular. Computable General Equilibrium (CGE) models are used to analyze the normative question of whether the tax rate for intermediate use by firms should be the same as the tax rate for final consumption by households. To answer this question, a distinction needs to be made between fiscal taxes for the purpose of raising revenue for the government, and Pigovian taxes for the purpose of changing behaviour. Concerning fiscal taxes, firms should not pay taxes on their use of inputs if the tax rates in final consumption are at their optimal level. If the tax rate for households is above the optimal level, intermediate use in firms should be taxed in order to increase the price of other commodities and reduce the distortion of relative prices. Essay 1 ascertains what factors determine the optimal relation between the tax rate for final consumption by households and intermediate use by firms. Essay 2 analyses Swedish energy taxes from the perspective of reducing global emission of CO2. It is found that the welfare maximizing tax rates are equal for households and firms not participating in emission trading, while firms that participate in emission trading should have a zero tax rate. Essays 3 and 4 deal with methodological issues. Essay 3 derives a new method for estimation of symmetric input-output tables from supply and use tables. This method solves the problem of negative coefficients, makes it possible to use both the industry and commodity technology assumptions simultaneously and enables the commodity technology assumption to be used even when the number of commodities is larger than the number of industries. Essay 4 describes the model used in the first two essays. The price structure developed here makes it possible to take into account price differences between different purchasers other than differences in tax rates. This essay also makes a comparison between the Swedish implementation of this model and other Swedish CGE-models used to analyse climate policy and energy taxation.

Place, publisher, year, edition, pages
Örebro: Örebro universitet , 2010. , 27 p.
Series
Örebro Studies in Economics, ISSN 1651-8896 ; 19
Keyword [en]
Optimal taxation, energy taxation, environmental taxes, emission trading, climate policy, carbon leakage, CGE-analysis, input-output tables
National Category
Social Sciences Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:oru:diva-11902ISBN: 978-91-7668-753-6 (print)OAI: oai:DiVA.org:oru-11902DiVA: diva2:353119
Public defence
2010-11-12, Hörsal M, Fakultetsgatan 1, Örebro, 13:15 (Swedish)
Opponent
Supervisors
Available from: 2010-09-24 Created: 2010-09-24 Last updated: 2016-11-21Bibliographically approved
List of papers
1. Taxing intermediate goods to compensate for distorting taxes on household consumption
Open this publication in new window or tab >>Taxing intermediate goods to compensate for distorting taxes on household consumption
(English)Manuscript (preprint) (Other academic)
Abstract [en]

In contrast to the classic result in Diamond and Mirrlees (1971) that fiscal taxes should not be levied on intermediate use of goods, Newbury (1985) showed that, in a closed economy with Leontief technology, input taxes should be used to indirectly tax commodities that for some reason are untaxed in final consumption.

This paper extends the Newbury result to more general cases; i.e., to open economies with substitution possibilities in the production functions. Moreover, it shows that the welfare maximizing proportion between the tax rate for intermediate use by firms and final demand by households declines with higher elasticities of substitution in production functions and with higher price elasticities in import demand functions and export supply functions. It also shows that the welfare maximizing proportion of tax rates between households and firms for one commodity will depend upon the corresponding proportion of tax rates for important substitutes for that commodity. These results are shown both in stylized Computable General Equilibrium (CGE) models and in an applied CGE model of the Swedish economy where the tax on electricity is used as an example.

Keyword
Optimal taxation, CGE-analysis
National Category
Economics Social Sciences
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-12173 (URN)
Available from: 2010-10-14 Created: 2010-10-12 Last updated: 2016-11-21Bibliographically approved
2. Climate policy within an international emission trading system: a Swedish case
Open this publication in new window or tab >>Climate policy within an international emission trading system: a Swedish case
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper uses a CGE model to analyse the optimal climate policy in Sweden before and after introduction of the Emission Trading System (EU ETS) for CO2  emissions in the European Union. The optimal distribution of domestic energy tax rates is derived for different actors. It is shown that the welfare maximizing tax rates, before the introduction of EU ETS, is equal for all actors in the economy. After the introduction of the EU ETS, it is beneficial to have exemptions for installations covered by emission trading. Before the introduction of EU ETS the low tax rates for electricity induced substantial carbon emissions in neighbouring countries through the common Nordic market for electricity. This effect, however, is not present after the introduction of EU ETS.

Keyword
CO2 taxation; Energy taxation; Climate Policy; Computable General Equilibrium; Carbon Leakage; Emission Trading.
National Category
Economics Social Sciences
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-12174 (URN)
Available from: 2010-10-14 Created: 2010-10-12 Last updated: 2016-11-21Bibliographically approved
3. Estimation of Commodity-by-Commodity Input–Output Matrices
Open this publication in new window or tab >>Estimation of Commodity-by-Commodity Input–Output Matrices
2006 (English)In: Economic Systems Research, ISSN 0953-5314, E-ISSN 1469-5758, Vol. 18, no 2, 205-215 p.Article in journal (Refereed) Published
Abstract [en]

In this paper we derive a method for the estimation of symmetric input–output tables (SIOTs), which makes it possible to use the commodity technology assumption even when use- and make tables are rectangular. The method also solves the problem of negative coefficients. In the empirical part we derive annual SIOTs in order to evaluate the differences between SIOTs calculated with different methods and the change in technical coefficients over time. Our results, based on data for Sweden, show that the impact of using different technology assumptions is rather large. However, in a factor content of trade application the impact of different technology assumptions does not seem to be very important. Also the size of the changes in the technical coefficients over time is found to be quite large, indicating the importance of calculating SIOTs annually.

Place, publisher, year, edition, pages
London: Routledge, 2006
Keyword
Input–output model, commodity technology, product technology, factor content of trade
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-12177 (URN)10.1080/09535310600653164 (DOI)2-s2.0-33745302399 (Scopus ID)
Available from: 2010-10-14 Created: 2010-10-12 Last updated: 2016-11-21Bibliographically approved
4. SAINT: A standardized CGE-model for analysis of indirect taxation
Open this publication in new window or tab >>SAINT: A standardized CGE-model for analysis of indirect taxation
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper describes a computable general equilibrium (CGE) model that builds on the IFPRI standard model but is more suitable for analysis of taxes on specific commodities. It has a richer structure of taxes and trade margins on commodities than the IFPRI model and a flexible nest structure of production and household demand functions. It may be used for open as well as for closed economies. Also, data for a Swedish implementation is described and this application of the model is compared to some previous Swedish CGE models in terms of the estimated effects of a doubling of the CO2 tax rate.

Keyword
CGE-models, commodity taxes, permit trading.
National Category
Economics Social Sciences
Research subject
Economics
Identifiers
urn:nbn:se:oru:diva-12175 (URN)
Available from: 2010-10-14 Created: 2010-10-12 Last updated: 2016-11-21Bibliographically approved

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