Taxation and Migration: Policies to Manage a Resource Boom

Ratbek Dzhumashev and Jaai Parasnis

No 33-11, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: The Australian economy is currently experiencing a resource boom and policy responses to this boom such as migration and taxation, as well as the broader role of monetary and fiscal policies are the subject of academic as well as public debate. This paper investigates the impact of a resource boom in a dynamic macroeconomic model, focusing on the allocation of resources across sectors and changes in income distribution. Further, the paper contributes to the current policy debate by analysing the role and effectiveness of government policy through its migration policy and taxation of the mining sector, in addressing the short run and steady state impacts of a resource boom. Results illustrate that while increased immigration is an appropriate short run response, long run welfare can be enhanced by higher taxation of the mining sector. Indeed, results show that increased tax revenue can fund appropriate transfers to mitigate the adverse effects on labour income and provision of public goods to increase productivity in the rest of the economy.

Keywords: Dutch Disease; natural resources; economic growth; income distribution (search for similar items in EconPapers)
JEL-codes: E25 E60 H20 Q33 Q38 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2011-12
New Economics Papers: this item is included in nep-dge, nep-mac, nep-mig and nep-pbe
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