 Energy intensity and directed fiscal policyIbrahim Yetkiner () and Istemi Berk Economic Systems, 2023, vol. 47, issue 2 Abstract: This paper assesses the effects of fiscal policy on economy-wide energy intensity within an endogenous growth framework. To this end, we first develop a two-sector (investment good and consumption good) augmented AK model by integrating the Uzawa model with Rebelo’s AK model, and assume that a non-renewable resource is one of the factors of production. Using this framework, we solve the model for the short and long run, identifying the sufficient parameter conditions that ensure higher energy intensity in the investment goods sector. We then introduce a balanced budget government, whose objective is to decrease the economy-wide energy intensity by levying tax on the energy-intensive investment goods sector and subsidizing the consumption goods sector. Contrary to our expectations, we find that this fiscal policy design increases economy-wide energy intensity as it leads to a decline in real GDP without changing total energy consumption. On the basis of this model, we propose the concept of a ‘directed fiscal policy’, which connotes a reduction of the economy-wide energy intensity by following a heterogeneous taxation policy across sectors. Keywords: Directed fiscal policy; Energy intensity; Taxation; Endogenous growth; Non-renewable energy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:47:y:2023:i:2:s0939362522001327 DOI: 10.1016/j.ecosys.2022.101070 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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