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Sustainability 2016, 8(4), 352;

Input vs. Output Taxation—A DSGE Approach to Modelling Resource Decoupling

Institute for Structural Research, Warsaw 02-516, Poland
Warsaw School of Economics, Warsaw 02-554, Poland
Author to whom correspondence should be addressed.
Academic Editors: Tomas Ekvall, Francesca Montevecchi, Martin Hirschnitz-Garbers, Martha Bicket and Patrick ten Brink
Received: 8 February 2016 / Revised: 1 April 2016 / Accepted: 5 April 2016 / Published: 12 April 2016
PDF [3141 KB, uploaded 12 April 2016]


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 multi-sector dynamic stochastic general equilibrium (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 adoption of resource-saving technologies. We calibrate the model for the EU27 area using an 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 than in the case of a comparable output tax. We also find that using revenues to reduce taxes on labour has stronger beneficial effects for the input tax. View Full-Text
Keywords: DSGE model; resource decoupling; technological change; environmental taxes; environmental policy; double dividend DSGE model; resource decoupling; technological change; environmental taxes; environmental policy; double dividend

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Antosiewicz, M.; Lewandowski, P.; Witajewski-Baltvilks, J. Input vs. Output Taxation—A DSGE Approach to Modelling Resource Decoupling. Sustainability 2016, 8, 352.

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