Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: In this paper, the likely effects of an environmental fiscal reform in Namibia are examined using a Computable General Equilibrium model. Namibia is a natural resource rich country with poverty alleviation as one important target on the policy agenda. One way for the government of simultaneously ensuring both a sustainable use of the resources and a less skewed income distribution might be to introduce an environmental fiscal reform, where taxes on natural and environmental resources (fish rents, energy and water) are recycled in order to give additional benefits (in terms of GDP, employment and income distribution) to the economy. The results indicate that for some recycling options, there is scope for additional benefits. Subsidizing unskilled labour would give the most favourable result, at least in terms of real GDP and employment. However, poverty might not only be a question of employment; since food constitutes a significant part of poor households’ expenditures, a decrease in taxes on food might be an interesting option if GDP, employment, income distribution and environmental impacts are considered in combination.

Keywords: computable general equilibrium model; environmental fiscal reform; revenue recycling

JEL-codes: D58; H21; O13; Q25

50 pages, November 11, 2008

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