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A Cge Model for Environmental and Trade Policy Analysis in Chile: Case Study for Fuel Tax Increases

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  • Raúl O'Ryan
  • Carlos J. de Miguel
  • Sebastian Miller

Abstract

Computable General Equilibrium (CGE) models are a powerful economic tool for multidimensional/multi-sectoral analysis. They improve traditional input-output analysis generating quantities and prices endogenously and reflecting market incentives. They complement partial equilibrium analysis with a broader scope of analysis and the quantification of indirect and often non-intuitive effects. Environmental applications of CGE models include trade and environment, climate change, energy problems, natural resources management and environmental regulation analysis. The ECOGEM-Chile model described in this paper can be used to analyse impacts on macro, sectoral, social and environmental (air, water and land pollutants) variables of different economic, social or/and environmental policies, such as trade policies, environmental taxes, external price shocks, among others. The model incorporates the recently released 1996 input/output matrix as well as the most recent information on wages and income. In the specific application developed here, the model is used to analyse direct and indirect impacts on the Chilean economy of increasing fuel taxes by 100%. Additionally a trade policy of reducing tariffs to compensate the increase in revenues of these taxes is simulated. The tariff reductions are in line with the current Chilean trade policy. Winners and loser from both exercises are identified as well as the main determinants of the results.

Suggested Citation

  • Raúl O'Ryan & Carlos J. de Miguel & Sebastian Miller, 2005. "A Cge Model for Environmental and Trade Policy Analysis in Chile: Case Study for Fuel Tax Increases," Documentos de Trabajo 211, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:211
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    References listed on IDEAS

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    1. O'Ryan, Raúl & Miller, Sebastian & de Miguel, Carlos J., 2003. "A CGE framework to evaluate policy options for reducing air pollution emissions in Chile," Environment and Development Economics, Cambridge University Press, vol. 8(2), pages 285-309, May.
    2. Beghin, John C. & Bowland, Bradley J. & Dessus, Sébastien & Roland-Holst, David & Mensbrugghe, Dominique van der, 2002. "Trade integration, environmental degradation, and public health in Chile: assessing the linkages," Environment and Development Economics, Cambridge University Press, vol. 7(2), pages 241-267, May.
    3. Juan Eduardo Coeymans & Felipe Larraín, 1994. "Efectos de un Acuerdo de Libre Comercio entre Chile y Estados Unidos: Un Enfoque de Equilibrio General," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 31(94), pages 357-400.
    4. Raúl O'Ryan & Carlos J. de Miguel & Sebastián Miller, 2000. "Ensayo sobre equilibrio general computable: Teoría y aplicaciones," Documentos de Trabajo 73, Centro de Economía Aplicada, Universidad de Chile.
    5. Kneese, Allen V., 1998. "No time for complacency," Environment and Development Economics, Cambridge University Press, vol. 3(4), pages 491-537, October.
    6. Dasgupta, Partha & Mäler, Karl-Göran, 1998. "Analysis, facts, and prediction," Environment and Development Economics, Cambridge University Press, vol. 3(4), pages 491-537, October.
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