Modelling Consumer Demand and Household Labour Supply: Welfare Effects of Increasing Carbon Taxes

Runar Brännlund () and Jonas Nordström ()
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Runar Brännlund: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Jonas Nordström: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 571, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: The main objective of this paper is to analyse consumer response and welfare effects due to changes in energy or environmental policy. To achieve this objective we formulate and estimate an econometric model for non-durable consumer demand in Sweden that utilises micro- and macro-data. In the demand model male and female labour supply is included as conditioning goods. To account for possible changes in labour supply due to increasing carbon taxes we estimate separate labour supply functions for men and women. In the simulations we consider two revenue neutral scenarios that both imply a doubling of the CO2 tax; one that returns the revenues in the form of a lower VAT and one that subsidise public transport. One conclusion from the simulations is that the CO2 tax has regional distribution effects, in the sense that household living in sparsely populated areas carry a larger share of the tax burden.

Keywords: Consumer economics; demand analysis; energy taxation; labour supply (search for similar items in EconPapers)
JEL-codes: C30 D12 Q41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic and nep-res
Date: 2001-11-01
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