Assessing energy subsidy policies in a structural macroeconomic model

Ruey Yau and Guan-Han Chen

Energy Economics, 2021, vol. 103, issue C

Abstract: We assess the welfare consequences of energy price subsidies for an energy-importing country using a structural macroeconomic model that includes energy and durable goods consumption. To consume durable goods, energy consumption is required. In production, the use of energy and capital are complements. We calibrate the model to fit the economy of Taiwan. The results indicate that the optimal policy is achieved when subsidies are allocated to firms. This is primarily because in this economy energy is mostly consumed by industries rather than by households. The welfare gain is, however, very limited. Further sensitivity analysis suggests that having no subsidy would be the optimal policy in a less energy-dependent economy.

Keywords: Energy subsidies; Durable goods; Energy dependence; Welfare (search for similar items in EconPapers)
JEL-codes: E62 Q43 Q48 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:103:y:2021:i:c:s0140988321003911

DOI: 10.1016/j.eneco.2021.105509

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