An integrated tax-subsidy policy for carbon emission reduction

A carbon tax is often cited by economists as an effective instrument to mitigate greenhouse gas emissions, but there is little political interest in the United States. In light of this political unpopularity, we develop and examine a net-revenue constrained carbon tax and subsidy program. The optimal revenue constrained tax and subsidy schedule based on our utility maximization model taxes energy sources with high emissions to energy price ratio, and subsidizes sources with low emissions to energy price ratios. This approach may be more palatable than a traditional carbon tax because it can change the relative price of low and high emissions energy sources while providing a mechanism to limit net tax increases and energy price increases. We find that a constrained tax/subsidy program provides welfare gains relative to a no-tax scenario. Welfare gains are estimated to be 1% and 36% of the welfare gains from a Pigouvian tax for the motor fuels industry and electric power industry, respectively. In contrast, subsidies for low-emitting energy sources funded from general tax funds rather than from high-emission energy tax revenues lead to welfare decreases substantially below our proposed tax/subsidy policy approach.     

Reforming Food Subsidy Schemes: Estimating the Gains from Self-targeting in India

The paper uses the theoretical framework of the theory of tax reform to analyze whether a “small” change in an existing food subsidy program can be both welfare‐improving and revenue‐neutral. It shows how existing econometric methods can be adapted to estimate demand parameters even when household‐level data exhibit little price variation because the government controls food prices. The methodology is used to estimate welfare changes from shifting a rupee of subsidy on existing commodities to coarse cereals in the Indian public distribution system.     

The optimal treatment of tax expenditures

This paper analyzes the optimal treatment of tax expenditures. It develops an optimal tax model where individuals derive utility from spending on a “contribution” good such as charitable giving. The contribution good has also a public good effect on all individuals in the economy. The government imposes linear taxes on earnings and on the contribution good so as to maximize welfare. The government may also finance directly the contribution good out of tax revenue. Optimal tax and subsidy rates on earnings and the contribution good are expressed in terms of empirically estimable parameters and the redistributive tastes of the government. The optimal subsidy on the contribution good is increasing in the size of the price elasticity of contributions, the size of the crowding out effect of public contributions on private contributions, and the size of the public good effect of the contribution good. Numerical simulations show that the optimal subsidy on contributions is fairly sensitive to the size of these parameters but that, in most cases, it should be lower than the earnings tax rate.     

Emissions abatement R&D: Dynamic competition in supply schedules

This paper investigates the optimal environmental policy (the mix of emissions tax and research and development [R&D] subsidy) in a dynamic setting when two firms, producing differentiated products, compete in the output market over time. Firms compete in a differential game setting over supply schedules, which encompasses a continuum of imperfect competition equilibria from Bertrand to Cournot. Although production generates environmentally damaging emissions, firms can undertake R&D that has the sole purpose of reducing emissions. In addition to characterizing the optimal policy, we examine how the optimal tax and subsidy, and the optimal level of abatement, change as competition intensifies, as the dynamic parameters change, and as the investment in abatement technology changes. In this setting, competition increases welfare through its impact on the final goods price. However, lower prices result in larger quantities and more pollution. Our key contribution is to show how the impact of increased competition on welfare depends on the extent of the market and the nature of preferences and technology.     

Choice and design of regulatory instruments in the presence of green consumers

Using a vertically differentiated product model, this paper examines welfare implications of various government policies in a situation where consumers are environmentally discerning. It studies ad valorem taxes/subsidies and emission taxes. The optimal policy depends on the magnitude of damage parameter associated with environmental externality. For a given distribution of tastes and preferences, as the damage parameter increases from a low to a high value, the optimal policy shifts from an ad valorem tax to an ad valorem subsidy. It also shows that for a sufficiently low damage parameter, an ad valorem tax dominates an emission tax.     

国际多市场寡头条件下的贸易政策和产业政策

国际多市场寡头是Bulow( 1 985)提出的多市场寡头概念在国际贸易领域的自然延伸。在本文中 ,市场之间联系的纽带是本国企业具有规模收益递减的生产技术。本文的主要结论是 ,第一 ,如果本国企业与外国企业在外国市场进行价格竞争 ,那么 ,最优干预组合包括国内生产补贴与出口税 ,它们对本国福利的作用是一致的。第二 ,如果本国企业与外国企业在外国市场进行数量竞争 ,那么 ,最优干预政策组合包括国内生产补贴与出口补贴 ,它们作用于本国福利的方向是不一致的 ,这时 ,本国政府用国内生产补贴执行反托拉斯职能 ,用出口补贴执行利润转移职能。第三 ,作为模型的一个应用 ,本文论证了出口退税政策会加剧国内市场的扭曲 ;而且它不一定能够提高本国福利。     

Revenue-increasing and welfare-enhancing reform of taxes on exports

The loss of revenue from a reduction in export taxes has been a concern for trade policy reform in many developing countries. We discuss a strategy for selective reform of taxes on exports that enhances welfare and increases revenue. The strategy involves a reduction in the export tax on a given commodity with an offsetting increase in production tax to keep the producer price unchanged. This strategy is especially promising for exportables with a net subsidy on domestic consumption due to high export taxes and low consumption taxes.     

Optimal Countervailing Intervention

This paper examines the optimal countervailing measures in response to foreign subsidy. Two alternative objectives are considered: (1) to maintain the domestic producer price, or (2) to maintain the initial import level. Three different instruments are discussed: a tariff, a production subsidy, and a consumption tax. Their rankings in terms of welfare costs are established. One important finding is that, contrary to present convention, the optimal countervailing rate may have to exceed the foreign subsidy rate. [411]     

Trade Policies for Exporting Industries under Free Entry

This paper computes optimal export taxes and domestic production subsidies for exporting industries under free entry. We show that domestic welfare is not at maximum, as is typically believed, when the export price is a monopoly price, and the domestic price is a competitive price, because a market structure effect has to be taken into account. Furthermore, we show that the optimal tax/subsidy formulas for an oligopoly coincide with those under perfect competition, if foreign and domestic demand functions are both linear. We also discuss optimal trade policies when only one instrument is available, and we run numerical simulations to determine and compare optimal trade taxes under endogenous and exogenous market structures.     

Foreign-Investment Tax and Tariff Policies in Developing Countries

In this paper we examine the welfare effects of tax on foreign capital and tariff policies for a small open economy with sectoral unemployment. The individually and jointly optimal tax and tariff rates in the absence or presence of international tax credits are derived. A subsidy on foreign capital coupled with a tariff can be jointly optimal when tax credits are absent in the source country. However, the capital subsidy policy may fail to hold when the foreign country follows a tax credit system.     

R&D policy in a vertically related industry

In this paper, we analyze the effectiveness of public policy aimed to stimulate business-performed R&D in a vertically related market. We examine the role of an R&D active upstream supplier in a four-stage R&D model, where we incorporate public funding. The considered policy instrument is direct funding of firms’ R&D efforts. We calculate the optimal policies and show that they have a positive impact on firms’ R&D investments. From a welfare point of view, it is optimal to differentiate the subsidy rates between the upstream and the downstream markets. Competition in the product market leads to a higher subsidy rate to the upstream supplier than to the downstream firms. When concentration is high in the downstream market, the optimal solution is an R&D subsidy for these firms, otherwise the optimal solution is an R&D tax for the downstream firms.     

食品价格上涨对城镇家庭消费与福利影响研究——基于EASI模型

文章基于与2015年度诺贝尔经济学奖得主迪顿的接近理想需求系统 AIDS 来源相同的EASI需求系统 ,采用CHNS调查数据 ,运用 EASI需求系统实证分析了各类食品价格上涨对不同收入等级城镇家庭消费与福利的影响 ,并比较了收入补贴与价格补贴的经济效果.研究发现:(1)我国城镇居民动物性食品消费支出占食品总支出的比重最大 ,其次是粮食和蔬菜 ,城镇居民的食品消费结构为"动物性食品+粮食+蔬菜" ,这说明动物性食品价格上涨对我国城镇居民日常膳食消费的影响相对较大.(2)粮食价格对困难户和最低收入家庭的福利影响最大 ,动物性食品价格对较低收入家庭的福利影响最大.(3)对低收入家庭而言 ,当动物性食品价格上涨时 ,收入补贴政策的效果优于价格补贴政策 ;当粮食价格上涨时 ,价格补贴政策的效果优于收入补贴政策.文章最后从生产、补贴政策和分配制度的角度提出了政策建议.     

Biofuel Subsidies and International Trade

This paper explores optimal biofuel subsidies in a general equilibrium trade model. The focus is on the production of biofuels such as corn‐based ethanol, which diverts corn from use as food. In the small‐country case, when the tax on crude is not available as a policy option, a second‐best biofuel subsidy may or may not be positive. In the large‐country case, the twin objectives of pollution reduction and terms‐of‐trade improvement justify a combination of crude tax and biofuel subsidy for the food exporter. Finally, we show that when both nations engage in biofuel policies, the terms‐of‐trade effects encourage the Nash equilibrium subsidy to be positive (negative) for the food exporting (importing) nation.     

Tax competition for foreign direct investments and the nature of the incumbent firm

We investigate tax/subsidy competition for foreign direct investments (FDI) between countries of different size when a domestic firm is the incumbent in the largest market and we study how the nature (public or private) of the incumbent firm affects policy competition. We show that, differently from the case of a private firm, the country hosting the incumbent always benefits from FDI if the domestic firm is a public welfare‐maximizing firm. We also show that the public firm acts as a disciplinary device for the foreign multinational that will always choose the efficient welfare‐maximizing location. An efficiency‐enhancing role of policy competition may then arise only when the domestic incumbent is a private firm, whereas tax competition is always wasteful in the presence of a public firm.     

Foreign competition and optimal privatization with excess burden of taxation

We examine in a mixed oligopoly setting how foreign competition and the excess burden of taxation will affect privatization policy in the presence of strategic tax/subsidy policies. We show that in the presence of excess burden of taxation with foreign competitors, output subsidy coupled with import tariff and partial privatization is adopted to improve the social welfare. However, if the excess burden of taxation is relatively large, the government may switch to use production tax coupled with tariff policy and partial privatization to improve the social welfare.     

Trade policy and mixed enterprises

Abstract .  This paper demonstrates that the degree of state ownership affects neither the level of socially optimal activities nor welfare if the government chooses optimal trade policy instruments. In the case of rivalry in the home market, the optimal import tariff is independent of the degree of state ownership, and the optimal production subsidy decreases with state ownership if the optimal tariff is positive. For the case of Cournot rivalry in a third market, the optimal export subsidy increases with state ownership, while in the case of Bertrand rivalry with differentiated products, the optimal export tax increases with state ownership.     

Green certification,heterogeneous producers,and green consumers: a welfare analysis of environmental regulations

We develop a vertical differentiation model to analyze welfare implications of environmental policies in a competitive market with production and consumption heterogeneity. Consumers with heterogeneous preferences choose between non-green and certified green products, while producers with heterogeneous production costs decide whether to engage in green production. In order for green products to be recognized by consumers, producers must join a green club. Key findings are summarized as follows. (i) The number of green producers, environmental standard, and overall welfare under the market solution are all socially sub-optimal. (ii) The introduction of a subsidy policy for greener production and standards is shown to increase social welfare, but is not Pareto optimal. (iii) A dual policy, which combines abatement subsidizes for a greener production standard and a tax charge for green certification, is shown to be the Pareto-optimal outcome.     

Quantitative Import Restrictions and Optimal Capital Taxes Under a System of Tax Credits

This paper examines the optimal capital tax policy under quantitative import constraints, and international capital tax credits. For a small capital-importing country, the optimal capital tax equals the foreign tax under a quota, and equals or exceeds the foreign tax under a VER. For a small capital-exporting country, the optimal policy towards capital is a zero tax under a quota, and a tax or a subsidy under a VER. Also examined are the welfare effects of capital taxes and trade liberalization, and the joint setting of the two policies, when both instruments are available to the government.     

Optimal privatization and uniform subsidy policies: A note

The privatization neutrality theorem states that the share of public ownership in a firm does not affect welfare under an optimal uniform tax‐subsidy policy. We revisit this neutrality result. First, we investigate the case in which the private firm is domestic. We show that this neutrality result does not hold unless public and private firms have the same cost function. Next, we investigate a case in which both domestic and foreign investors own the private firm. We show that the optimal degree of privatization is never zero, and thus, the neutrality result does not hold, even when there is no cost difference between public and private firms.     

Optimal Trade Policy with Horizontal Differentiation and Asymmetric Costs

This paper examines the optimal export policy under Bertrand competition when the products exhibit horizontal differentiation and production costs are asymmetric. The focus of this paper is on the product‐differentiation effect in the determination of the optimal export policy. We show that given that the equilibrium characteristic of a foreign firm's product R&D lies to the left‐hand side of its initial level , since the foreign firm has a unit cost advantage and the efficiency of its R&D technology is sufficiently low, a rise in the export subsidy of the domestic country increases a domestic firm's profits and then welfare by extending the degree of horizontal differentiation between the two products. Thus, the optimal export policy under Bertrand competition may turn out to be an export subsidy rather than an export tax. This result is in sharp contrast to that of Eaton and Grossman (1986 ).