Brita Bye

The welfare effects of housing taxation in a distorted economy: A general equilibrium analysis

Efficient capital taxation has been one of the most important objectives for large tax reforms implemented in several countries during the last decades. The Norwegian Tax reform of 1992 took a large step towards tax neutrality between the different capital types and uses. However, housing capital is still an exception. The marginal effective tax rate on housing is substantially lower than the marginal effective tax rates on other capital types and uses. In this paper the welfare effects of imposing a neutral system of housing taxation are analyzed by using an intertemporal disaggregated numerical model for the Norwegian economy. The tax reform implies a substantial increase in the tax revenue from housing taxation, and the welfare effects of different rebating alternatives for the additional tax revenue as lump sum rebating or reductions in other distortionary taxes, are considered.

Environmental Tax Reform and Producer Foresight: An Intertemporal Computable General Equilibrium Analysis

This paper analyses the non-environmental welfare costs of an environmental tax reform using a numerical intertemporal general equilibrium model for the Norwegian economy. The tax reform is revenue neutral such that an increase in the carbon tax rate is accompanied by a reduction in the payroll tax. By exploiting existing tax wedges in the labour market and between consumption and saving, the total non-environmental welfare effect of the tax reform is positive. The paper also analyses how imperfect price expectations for the investors in real capital influence the total welfare costs of the tax reform. The welfare effect is the same due to exploitation of initial distortions, but the transitional dynamics are quite different in the two paths.

Mitigation costs, distributional effects, and ancillary benefits of carbon policies in the Nordic countries, the U.K., and Ireland

This paper provides a survey of top-downmodelling analyses of carbon (C) abatementmitigation costs, distributional effectsand ancillary benefits in the Nordiccountries, the U.K. and Ireland. Specialemphasis is placed on the effects ofrevenue recycling and tax exemptions.According to the analyses, modestemissions reductions can be met withoutsubstantial costs for the countriesstudied, and a strong double dividend isfound in some analyses. The gross domesticproduct (GDP) or welfare effects are mostlyin the range of –0.4 and 1.2 percent whenC emissions are reduced by 20–30 per cent.Lowest costs are obtained without taxexemptions and with tax revenues used toreduce distortionary taxes. Ancillarybenefits are mostly in the range35–80/MgC-1, i.e., about the same order ofmagnitude as the mitigation costs.Distributional effects are mostlyregressive, unless the tax revenues aredistributed in lump-sum fashion with equaltransfers to each household.

Growth and Innovation Policy in a Small, Open Economy: Should You Stimulate Domestic R&D or Exports?

Abstract In small and open economies, absorption of foreign knowledge through international trade often plays a more important role for domestic innovation and growth than investment in domestic R&D. This suggests that trade policies can increase knowledge spillovers from abroad. Public support to R&D can be motivated both by positive internal knowledge externalities and by its ability to expand absorptive capacity. This dynamic, empirical, general equilibrium analysis models these interplays between R&D, trade and productivity. It compares public R&D support and export promotion of R&D based products with respect to long term growth and welfare impacts. We find that export promotion is inferior to R&D support in spurring R&D. However, it is not outperformed in terms of welfare generation. The reason is that existing and politically persistent policy interventions create inefficiencies that can be counteracted by R&D-based export promotion as a second-best policy.In small and open economies, absorption of foreign knowledge through international trade often plays a more important role for domestic innovation and growth than investment in domestic R&D. This suggests that trade policies can increase knowledge spillovers from abroad. Public support to R&D can be motivated both by positive internal knowledge externalities and by its ability to expand absorptive capacity. This dynamic, empirical, general equilibrium analysis models these interplays between R&D, trade and productivity. It compares public R&D support and export promotion of R&D based products with respect to long term growth and welfare impacts. We find that export promotion is inferior to R&D support in spurring R&D. However, it is not outperformed in terms of welfare generation. The reason is that existing and politically persistent policy interventions create inefficiencies that can be counteracted by R&D-based export promotion as a second-best policy.

Targeted carbon tariffs. Carbon leakage and welfare effects

Climate effects of unilateral carbon policies are undermined by carbon leakage. To counteract leakage and increase global cost-effectiveness carbon tariffs can be imposed on the emissions embodied in imports from non-regulating regions. We present a theoretical analysis on the economic incentives for emission abatement of producers subjected to carbon tariffs. We quantify the impacts of different carbon tariff designs by an empirically based multi-sector, multi-region CGE model of the global economy. We find that firm-targeted tariffs can deliver much stronger leakage reduction and higher efficiency gains than tariff designs operated at the industry level. In particular, because the exporters are able to reduce their carbon tariffs by adjusting emissions, their competitiveness and the overall welfare of their economies will be less randomly and less adversely affected than in previously studied carbon tariff regimes. This beneficial distributional impact could facilitate a higher degree of legitimacy and legality of carbon tariffs.