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Study On Fiscal Policy Based On Energy Constraint And Endogenous Growth

Posted on:2013-12-27Degree:DoctorType:Dissertation
Country:ChinaCandidate:Z X TangFull Text:PDF
GTID:1109330371968684Subject:Western economics
Abstract/Summary:PDF Full Text Request
This article aims to discuss sustainable development and optimal economic policy in the framework of endogenous economic growth in the role of the energy constraint and technological innovation. This study is mainly based on dynamic general equilibrium approach to explore the socially optimal long-term economic growth path and the path of market competition equilibrium. Macroeconomic meanings and microeconomic mechanisms of economic policies will also be discussed. In this study we concern about the characteristics of China’s current economics and the practice of economic reforms.The depletion of energy resources is one of the most important constraints to economic and social sustainable development. For any long-term economic trends, a key issue is whether the limited energy resources can maintain indefinitely continuous growth of the economy. If the long-term economic growth under limited resource constraints is possible, another very important issue is what the optimal equilibrium path of economic growth will be, and how the economic variables and parameters will affect the equilibrium path. According to the first and the second theorem of welfare economics, if the market is perfect, the market equilibrium and the optimal one are equivalent, which means in both cases the economy will achieve Pareto optimum. However, due to the monopolization of the market, the externalities of technology spillover and the depletion of energy resources in the economy, the optimal equilibrium is not necessarily equal to the market equilibrium. In this sense, the government needs to intervene in the market and some economic policies are indispensable. So, if the government must correct this market distortion and improve the economic equilibrium path by the fiscal policies and taxation, what taxation rate and/or subsidy rate is optimal for the economy, and theoretically, how we should systematically evaluate the effectiveness and efficiency of these economic policy tools.For the issues above, we review the relevant research literatures and gradually carried out our four-part study. Firstly, we develop a four-sector endogenous growth model with the vertical innovation and energy constraints. By the method of optimal control theory and general equilibrium approach, we solve and discuss the socially optimal growth path and its conditions of existence. We perform comparative static analysis and discuss the long-term growth effects of the various parameters. We also do system robustness tests and use phase diagram methods to study the stability of their econimic equilibria.Secondly, we solve and discuss the balanced growth path of market-based competitive economy with renewable energy and technological innovation.We extend the exhaustible energy model into the renewable energy model whose economic mechanism and external conditions are similar to the former by the method of using linear stock dynamics in energy sector. We solve the balanced growth path of the decentralized decision-making economy, discuss its conditions of existence, perform the comparative static analysis, and do some numerical simulations to show the various parameters’ long-term growth effects of the output, the energy consumption and the technical progress.Thirdly, we compare and discuss the results of the social optimum which means the social planner’s optimal allocation of resources by centralized decision-making and the market-based competitive equilibrium by decentralized decision-making. Then we develop a four-sector endogenous growth model with the quality progress of intermediate goods and the restraints of energy resource depletion to study the optimal economic policy for an economy which is characterized by technological innovation and energy constraints. There are also final goods sector, intermediate goods sector, R&D sector, and energy sector in this model however, in which the taxes on final goods, subsidies on technical innovation and on intermediate goods are introduced. We solve a variety of optimal economic policy and study the efficiency and effectiveness of various policy tools which are introduced to correct market distortions and improve economic efficiency. In this part, we especially focus on three types of policy tools of intermediate goods subsidies, technological innovation subsidies, and human capital wage policy.Finally, on the basis of analysis of the characteristics of China’s energy industry and the practice of energy taxation reform, in the framework of imperfect competition market structure, we investigate what kind of energy economic policies will be opitimal and most in line with the principles of economic efficiency, resource conservation and sustainable development. We use dynamic partial equilibrium approach to solve and discuss the optimal per-unit-tax, the optimal ad-valorem-tax. the optimal royalties, the optimal corporate income tax and the optimal recovery rate subsidies. On the other hand, we use dynamic general equilibrium approach to discuss the balanced growth path of one economy with monopoly energy sector which never introduced in previous models, to analysize the negative effects of excess profits of the monopoly industry from the perspective of the economy as a whole, as well as to study a kind of optimal innovation policy by which energy firms can reduce their production costs to improve the overall economic efficiency.The main conclusions are as follows.(1)If the economy has sufficient human capital accumulation and higher efficiency of R&D, and the quality of the output of innovation activities is adequate and effective, the economy will overcome the constraint from the scarcity of natural energy resources, thereby maintain the long-term economic growth. The socially optimal balanced growth path is a local saddle equilibrium. that is, theoretically there at least has one optimal growth path of convergence in this economy.(2)Human capital, technology development and social preferences play a key role for sustainable development. Human capital accumulation and R&D efficiency are the sources of long-term growth. Not only the total human capitals in the economy, but also the human capitals allocated in the potential field of scientific and technological innovation, really promote the long-term economic growth. Our conclusion also shows that in this economy, only human capital accumulation and R&D efficiency could offset the effect of the nearer consumption preference of the social representative family, the social optimum and market equilibrium path could have a positive growth.(3) Generally speaking, the economic policy instruments could improve economic efficiency and help to achieve the socially optimal equilibrium path, but the policy effectiveness and efficiency of policies varies for the different policy objectives. Such as in our policy model the subsidy to intermediate products in fanals sector, which means to the demand side of the market, is an invalid policy tool. But if that to intermediate products in intermediate sector, which means to the supply side of the market, it works. Another example, in our models there are three effective policy tools for technological innovation, subsidy to the R&D sector output, subsidy to the human resource wage in R&D sector and subsidy to the high-tech intermediates in intermediate sector. We show that the wage subsidy is the most efficient one.(4)The monopolization of the market, marginal costs of production, market interest rates will affect the optimal fiscal policy tools in different degree respectively, including the optimal per-unit-tax, the optimal ad-valorem-tax, the optimal royalties, the optimal corporate income tax and the optimal recovery rate subsidies. For the economy as a whole, if we consider imperfect competitiion energy market, the monopolistic market structure and the monopolistic excess profits of the energy sector will impact negatively on the overall economy and the balanced growth path.
Keywords/Search Tags:Energy constraints, Endogenous growth, Fiscal policy, Market monopoly, Economic efficiency
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