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A graphic explanation on how a tax on exports neutralizes the Dutch disease without costs to exporters

Author

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  • Luiz Carlos Bresser-Pereira

Abstract

The adequade way of neutralizing the Dutch disease is the imposition of a variable tax on the export of the commodity that originates the disease. If such tax is equivalent to the "size" of the Dutch disease, it will shifts to the right its supply curve of the commodity in relation to the exchange rate, giving the existing domestic sypply and the international demand, the exchange rate will depreciate at the value of the tax, and the quiligrium exchange rate will move from the "current" to the "industrial" equilibrium. JEL Classification: F31; F4; O11.

Suggested Citation

  • Luiz Carlos Bresser-Pereira, 2012. "A graphic explanation on how a tax on exports neutralizes the Dutch disease without costs to exporters," Brazilian Journal of Political Economy, Center of Political Economy, vol. 32(4), pages 700-702.
    • Handle: RePEc:ekm:repojs:v:32:y:2012:i:4:p:700-702:id:378
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    More about this item

    Keywords

    exchange rate; Dutch disease; tax on exports;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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