Incidence and Environmental Effects of Distortionary Subsidies

Garth Heutel and David Kelly

No 18924, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Government policies that are not intended to address environmental concerns can nonetheless distort prices and affect firms' emissions. We present an analytical general equilibrium model to study the effect of distortionary subsidies on factor prices and on environmental outcomes. We model an output subsidy, a capital subsidy, relief from environmental regulation, and a direct cash subsidy. In exchange for receiving subsidies, firms must agree to a minimum level of labor employment. Each type of subsidy and the employment constraint create both output effects and substitution effects on input prices and emissions. We calibrate the model to the Chinese economy, where government involvement affects emissions from both state-owned enterprises and private firms. Variation in production substitution elasticities does not substantially affect input prices, but it does substantially affect emissions.

JEL-codes: H23 Q52 Q58 (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-ene, nep-env, nep-pub, nep-reg and nep-res
Note: EEE PE
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as Garth Heutel & David L. Kelly, 2016. "Incidence, Environmental, and Welfare Effects of Distortionary Subsidies," Journal of the Association of Environmental and Resource Economists, vol 3(2), pages 361-415.

Downloads: (external link)
http://www.nber.org/papers/w18924.pdf (application/pdf)

Related works:
Working Paper: Incidence and Environmental Effects of Distortionary Subsidies (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:18924

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w18924

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().