median voters or budget maximizers evidence from school expenditure referenda some readers may have found these results of greater interest were we able to confirm the directional hypotheses of the certainty setter model in addition to finding that spending is related to the reversion the much weaker prediction of the uncertainty model yet the failure of the certainty when base elections were optional their infrequent occurrence might be expected under either a median voter or a setter model for those districts that did hold base elections the observations appear consistent with a setter model but are either inexplicable by or inconsistent with a median voter model finally both a the relationship between the number of budget elections and the presence of base elections and b the outcome of mandatory base elections in 1978 provide a set of observations that are challenging to either model a similar challenge was posed by our investigation of budget elections when we called attention to the inadequacy of static full information models rather than resolving the question of the simple setter model against the simple median voter model our results indicate that both may be inappropriate and that endeavors dealing with complexities omitted here are warranted

sunspots currency substitution and inflationary finance abstract this paper explores some issues surrounding inflationary finance of government deficits in a two country world with currency substitution each country s monetary policy is assumed to be subordinate to fiscal policy private agents knowing that the monetary authorities cannot commit themselves to fixed policy rules substitute among the two monies each monetary authority is then forced to accomodate the actions of the fiscal authorities and private agents by setting monetary growth rates consistent with their decisions this framework offers some interesting insights into the behavior of nominal exchange rates and their co movements with relative money supplies and government deficits

the effect of technology spillover on co2 emissions embodied in china australia trade abstract co2 emissions embodied in international trade have drawn wide attention in the academia and national climate negotiations in this study we estimate the embodied co2 emissions in the trade between china and australia using long time series disaggregated sectoral data based on missions embodied in bilateral trade eebt method and analyse the major driving forces for these emissions changes based on structural decomposition analysis sda method the results show that export volume contributed to these embodied co2 emissions increase while emission intensity could offset these co2 emissions increase we further predict embodied co2 emission in sino australia trade under different scenarios and the results indicate that technology spillover can significantly reduce embodied co2 emissions in trade electricity transportation and cement industries have significant potential to reduce carbon emissions in addition we evaluate future carbon reduction potential till 2030 the results in this study can inform decision makers for australia and china to formulate energy conservation and emission reduction policies

currency substitution and exchange rate volatility in the european community abstract some proponents of a european monetary union worry that capital mobility and currency substitution will result in unmanageable exchange rate volatility during the transition to monetary union in this paper we analyze stylized models of exchange rate fluctuation in response to monetary disturbances we find that if monetary policies within the community are convergent higher currency substitution either reduces or does not significantly change the volatility of exchange rates unless there are anticipations of a final realignment

seigniorage banking and the optimal quantity of money abstract this paper discusses seigniorage in an economy with imperfect competition in the banking sector the amount of total seigniorage and its division between the central bank and the banking sector are derived by using the opportunity cost concept of seigniorage the paper analyzes the impact of changes in inflation reserve requirements competition and technology on the division of seigniorage and on the welfare loss and relates the analysis to the concept of the optimal quantity of money

private fiat money with many suppliers a dynamic rational expectations model of money is used to investigate whether a nash equilibrium of many firms each supplying its own brand name currency will optimally deflate their currencies in friedman s 1969 sense the optimal deflation does arise under an open loop dynamic structure but the equilibrium breaks down under a more realistic feedback control structure

micro estimates of public spending demand functions and tests of the tiebout and median voter hypotheses responses to questions given to a random sample of michigan households are used to estimate public spending demand functions while income and price elasticities are similar to those obtained from aggregate data positive income elasticities appear to arise because public services are distributed in a prorich manner a relatively small variance in spending demands among urban and suburban communities in metropolitan areas with substantial public service variety suggests that the tiebout mechanism works this interpretation is supported by the fact that actual spending conforms substantially to desired levels in urban areas but less so in rural areas with little public sector choice

the inflation discipline of currency substitution abstract we examine the argument that currency substitution should be encouraged since it provides an inflation discipline in highly stylized games of national welfare maximization we find that as currency substitution increases currency survival comes to dominate all other considerations and inflation rates do indeed come down however we find no reason to think that these competitive inflation rates will be optimal the discipline embodied in currency substitution may be too weak or too strong it may be a poor substitute for direct coordination of monetary and fiscal policies we try to relate our analysis to recent u k proposals

production functions for climate policy modeling an empirical analysis abstract quantitative models for climate policy modeling differ in the production structure used and in the sizes of the elasticities of substitution the empirical foundation for both is generally lacking this paper estimates the parameters of 2 level ces production functions with capital labour and energy as inputs and is the first to systematically compare all nesting structures using industry level data from 12 oecd countries we find that the nesting structure where capital and labour are combined first fits the data best but for most countries and industries we cannot reject that all three inputs can be put into one single nest these two nesting structures are used by most climate models however while several climate policy models use a cobb douglas function for part of the production function we reject elasticities equal to one in favour of considerably smaller values finally we find evidence for factor specific technological change with lower elasticities and with factor specific technological change some climate policy models may find a bigger effect of endogenous technological change on mitigating the costs of climate policy

the optimal inflation tax when money reduces transactions costs abstract it has been argued that if money acts as an intermediate good the optimal inflation tax is zero this paper reexamines such a claim in the context of a model in which money reduces transactions costs it is shown that modeling money as an intermediate good does not necessarily imply that the optimal inflation tax is zero the optimality of a zero inflation tax depends on the properties of the transactions costs technology in particular if the transactions costs technology does not exhibit constant returns to scale it is optimal to resort to the inflation tax

the environmental and economic impact of the carbon tax in australia to fulfil its emission reduction target pledged in the copenhagen accord the australian government has determined to introduce a carbon tax from july 1st 2012 this paper simulates the effects on the environment and on the economy of a carbon tax of a 23 per tonne of carbon dioxide proposed by the government with and without a compensation policy we employ a computable general equilibrium model with an environmentally extended social accounting matrix according to the simulation results the carbon tax can cut emissions effectively but will cause a mild economic contraction because the price signal is intact the proposed compensation plan has little impact on emission cuts while significantly mitigating the negative effect of a carbon tax on the economy

the optimum quantity of money rule in the theory of public finance this paper examines optimal tax policy in a monetary economy in which money serves as an intermediate good that helps facilitate the conversion of scarce resources into tinal consumption goods by enabling consumers to economize on the costs of transacting it is shown that in such an environment even though distorting taxes must be levied for revenue purposes the optimal tax structure calls for abstaining from inflationary finance and adopting the optimum quantity of money rule

impact of an emissions trading scheme on australian households a computable general equilibrium analysis abstract following the international commitment to tackle climate change issues many countries have introduced climate change policies to reduce emission levels australia also expects to follow the international pathways to implement a climate change policy to curb its greenhouse gas emissions in this context the former labor government in australia intended to switch its carbon tax policy to an emissions trading scheme ets after 2 years of its initial operation to achieve an emission target of 5 per cent below the 2000 level by 2020 by employing a computable general equilibrium model and a social accounting matrix database this article analyses the potential impacts of an ets with various revenue recycling options on australian households results show that an emission permit price of a 20 per tonne of co2 e would help australia to achieve the 2020 emission reduction target this permit price is likely to have a small contraction in australia s real gdp i e about 0 3 per cent and in real household consumption i e about 0 19 per cent the price of electricity is projected to increase by 13 per cent the revenue recycling options seem to create an improvement in the macro economy and there is a trade off between economic efficiency and equity in the australian economy with compensations the personal income tax reduction policy results in an economic efficiency with a positive change in real aggregate household consumption whereas providing an equal lump sum transfer brings benefits equally for all household groups increased government transfers based on recipients current pension and allowance rates generate more welfare gains for middle income household groups

conservative dichotomous choice responses in the active policy setting dc rejections below wtp an important feature of a contingent value cv study is that researchers design a survey that guides respondents to answer dichotomous choice dc questions as if they represent once and for all choices researchers frequently construct hypothetical markets to satisfy this condition yet detractors assert that hypotheticality leads inevitably to inflated dc responses for active policy questions however some respondents may suspect that a cv informs an actual policy issue so to reject a dc might induce the policy maker to reintroduce the policy with a price reduction or a program improvement with potential incentives to deflate a dc response when policies are active we locate two types of respondents that represent two different incentives one class is expected to be able to risk permanent rejection of a waiver from one automobile emissions inspection this class more frequently rejects a dc value known to improve existing conditions another respondent class is expected to be risk averse to defeat of the program or to excessive delay predictably these respondents more frequently accept a dc value that represents a known gain conservative dc responses have implications for the use of cv in active policy contexts opening a role for theory to assist practitioners in these circumstances

political equilibrium and the provision of public goods this paper treats interest groups peoplein their role as consumers of a public goodand people in their role as taxpayers asthe unit of account for representativevoting each group is allowed to make aneffort to support its preferred candidateand at the margin the effort benefitratio is the political price the group iswilling to pay to secure an additionaldollar of benefits

age analysis of the impact of a carbon energy tax on the irish economy a computable general equilibrium model with specific detail in taxation and energy use is developed in this paper to quantify the impact of the implementation of energy taxation to reduce carbon dioxide emissions in ireland benchmark data combining physical energy and emissions data and economic data in the form of a social accounting matrix sam had to be compiled from various data sources because energy and pollution accounts from the seea are not available for ireland we find that the reduction target for energy related co2 emissions in ireland of 25 8 compared to 1998 levels can be achieved with a carbon energy tax of 10 15 euros per tonne of co2 though fuel switching is important in meeting the target this result is more sensitive to the possibilities for producers to substitute away from energy use welfare would fall but only by small percentages production and consumption patterns would change more significantly with a shift in demand from fuels with a high emission factor to energy sources with a lower carbon intensity and from energy to other commodities this paper confirms that a carbon energy tax leads to greater emission reductions than an equivalent uniform energy tax the latter has a stronger negative impact on the less polluting energy sectors whereas the carbon tax greatly stimulates the use of renewable energy and reduces the use of peat and coal the new sam the model and the application to energy taxes contribute to a better informed debate on environmental policy in ireland

government finance with currency substitution abstract we analyze seigniorage in an overlapping generations model where a friction induces a precautionary demand for a weaker currency the friction which is modeled as a transactions cost is viewed as an inverse measure of currency substitutability governments finance spending with costly income taxation or seigniorage we show that if governments act independently money growth is suboptimally low if currencies are sufficiently substitutable and too high otherwise if money growth is suboptimally low increasing substitutability lowers it further however since greater substitutability is associated with smaller real costs of exchanging money welfare need not fall

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

other people s money cash in advance microfoundations for optimal currency areas abstract in the traditional theory of optimal currency areas there are potential gains for stabilization policy with an independent exchange rate and money because rigidity of prices causes an inadequate response of relative prices to shocks recent empirical work using modern extensions of the mundell fleming model based on nominal contracts has supported this view this paper examines whether there is support for it in a classical representative agent model of linked open economies and finds that there is the result comes from the cash in advance constraint under which the household faces an inevitable delay between working receiving cash and being able to spend the proceeds this delay is the cash in advance analogue of the nominal price rigidity in the optimal currency area models

combining bottom up and top down abstract we motivate the formulation of market equilibrium as a mixed complementarity problem which explicitly represents weak inequalities and complementarity between decision variables and equilibrium conditions the complementarity format permits an energy economy model to combine technological detail of a bottom up energy system with a second best characterization of the over all economy our primary objective is pedagogic we first lay out the complementarity features of economic equilibrium and demonstrate how we can integrate bottom up activity analysis into a top down representation of the broader economy we then provide a stylized numerical example of an integrated model within both static and dynamic settings finally we present illustrative applications to three themes figuring prominently on the energy policy agenda of many industrialized countries nuclear phase out green quotas and environmental tax reforms

the median voter setters and non repeated construction bond issues the median voter model pervades the literature concerning the estimation of demands for collective expenditures but with some unanswered criticism the general issue addressed in this paper is whether observed collective expenditure levels and the characteristics of observed majorities are more adequately described by the median voter model or the romer and rosenthal setter model on a sample of non repeated hospital construction referenda bond issues the median voter model and the romer and rosenthal setter model are compared in both full information and uncertainty contexts little empirical support of the setter model is found indeed the evidence supports the absence of expenditure maximizing behavior the specific conclusions are 1 the standard median voter model explains quite well for this sample of non repeated bond issues 2 the explanatory power of the median voter model appears to vary across both voting arrangements and types of reversion threats 3 the explanation of hospital expenditures which have been judged too large may be due to how benefits and costs are distributed among voters and 4 the preponderance of large majorities for hospital construction in the face of evidence that such facilities typically become a burden on the general tax fund is consistent with setters offering the median ideal in the presence of a reversion below the ideal

monetary policy and country size abstract this paper uses a two country lucas tree model with a cash in advance constraint to investigate the impact of country size on monetary policy in the presence of externalities in this example the externality is the holding of domestic currency by foreign firms it is shown that large countries have a relatively smaller incentive to inflate than small countries cross country empirical tests show that among industrialized countries there exists a negative and significant relationship between the average of inflation rates between 1979 and 1989 and the average of both gdp and population jel e5 f4

international currency substitution and seigniorage in a simple model of money i introduction currency substitution describes the change in the holdings of domestic and foreign real balances in response to fluctuations in the relative prices of these currencies so far the empirical evidence on the strength of currency substitution has been mixed miles 1978 finds evidence in favor of strong currency substitution between the canadian dollar and the u s dollar bordo and choudhri 1982 criticize miles on the ground that miles has a misspecified model and their estimates of a canadian money demand function indicate little currency substitution in a recent paper rogers 1992 finds that dollarization in a high inflation economy such as mexico s is quite strong and statistically significant imrohoroglu 1994 on the other hand estimates the extent of currency substitution between the canadian dollar and the u s dollar using a gmm approach and finds that the elasticity of currency substitution in canada is quite low between 0 29 and 0 43 depending on the instruments used furthermore the estimate of the share of u s dollar denominated deposits in producing canadian liquidity services is on the order of 1 percent to 3 percent the policy implications of currency substitution have been extensively analyzed most of these studies concentrate on the impact of currency substitution on the volatility of exchange rates and the autonomy of domestic monetary policy under a flexible exchange rate regime 1 recently researchers have started to explore whether currency substitution alters the results in the optimal inflation tax literature for example vegh 1989 shows that it may be optimal to resort to the inflation tax under currency substitution since it reduces the distortion introduced by an exogenously given positive foreign interest rate in his model a positive foreign interest rate creates a distortion because it acts as an indirect consumption tax kimbrough 1991 analyzes a small open economy under currency substitution where domestic agents are required to use domestic real balances to purchase the domestic nontraded good foreign real balances to purchase the imported good and either domestic or foreign real balances to purchase the exportable good he finds that it is optimal to follow the friedman rule of a zero nominal interest rate in this setup since money serves as an intermediate good guidotti and vegh 1993 however argue that kimbrough s 1991 result only applies under very restrictive assumptions on the transactions technology and that in general the optimal inflation rate is positive under currency substitution aizenman 1992 considers a multi country money in the utility function model in a common currency area where there are collection costs associated with income taxation he shows that in the absence of a cartel agreement on how to share the seigniorage revenue the optimal inflation rate for individual countries will exceed the optimal inflation rate under a cooperative solution canzoneri and diba 1992 study the role of currency substitution in a two country money in the utility function model under a flexible exchange rate regime where there are collection costs of lump sum taxes they show that the outcome of a noncooperative seigniorage maximization or welfare maximization game is characterized by the friedman rule the cooperative outcome on the other hand includes the inflation tax as part of an optimal tax package since lump sum taxes are costly to collect the theoretical literature summarized above suggests that currency substitution may have important economic implications most of the attention has been on the role of the elasticity of currency substitution the share of foreign real balances in the residents domestic portfolio has largely been ignored laney radcliffe and willett 1984 and joines 1985 emphasize the distinction between the elasticity of substitution and the cross elasticity of money demand and argue that a high cross elasticity is necessary for currency substitution to have a major destabilizing impact on domestic money demand

the impact of an ets on the australian energy sector an integrated cge and electricity modelling approach this paper utilises a new computable general equilibrium cge model which integrates an electricity supply model to gauge the effects of a national emissions trading scheme ets on the australian energy sector and the broader economy the modelling results show that an ets can reduce emissions effectively and with a relatively small impact on the overall economy but the impact of the ets on individual sectors varies wind electricity generation is projected to benefit greatly brown coal electricity and gas electricity are expected to be adversely affected substantially somewhat surprisingly the impact on black coal electricity is negative but relatively small

microdata estimation of school expenditure levels an alternative to the median voter approach the main purpose of this paper has been to present an alternative approach to estimating individual demand for a local public good in this case education most empirical studies of the private demand for public goods utilize the median voter framework for preference aggregation to justify the use of median values over geographical areas for the independent variables in the estimation however the median voter approach assumes that voter characteristics are well represented by population characteristics and that median or mean values on all independent variables can be used to describe accurately the fictional median voter we cannot know whether the crucial voter has the median income level or other median characteristics with the median framework we also have great difficulty in specification of a model containing household characteristics as an alternative this paper utilizes actual household observations from a large random sample data set for the independent variables in the estimation while we have no way of ascertaining whether the observations in our sample are in equilibrium or are for the crucial voters in their jurisdictions the same problems exist for the median voter representation we can however know that the results are statistically reasonable and that specification and simultaneity problems are greatly reduced relative to the median voter approach

the impact on electric power industry under the implementation of national carbon trading market in china a dynamic cge analysis abstract as the largest carbon emissions source sector electric power industry is undoubtedly a principal part of the carbon trading market in china aimed at researching the impact on power industry beyond establishing the national carbon trading market a dynamic computable general equilibrium cge model embedded with carbon trading block is introduced in this paper subsequently we design 8 scenarios of which illustrate corresponding industry carbon emissions baselines and free quotas ratios the main simulation results are as follows the implementation of carbon emissions trading would bring a certain negative impact on the overall economy real gdp will be reduced by about 0 08 0 52 in 2030 though low free quotas ratio will cause a relatively high loss of gdp this negative impact would be eliminated in the long run in addition carbon emissions trading would also promote the clean production of electricity indeed the electric power industry would reach carbon emissions peak around 2020 relative to scenarios without carbon trading carbon emissions would reduce more than 1000 million tons in 2030 when industry carbon emissions baseline declines at an annual rate of 2 consequently the carbon market can achieve a more significant reduction in carbon emissions with the influencing of quotas fully auctioned scenario

dynamic formulation of a top down and bottom up merging energy policy model abstract the impact of energy policy measures is not restricted to the energy system and should therefore be analysed within an economy wide framework while keeping the essential details of the energy sector the aim of this paper is to present new developments in the field of the consistent evaluation of indicators for the sustainability assessment of energy policy measures starting from the static concept of bohringer energy econ 20 1998 233 this paper shows how the complementarity format can be used in computable general equilibrium cge modelling for a dynamic formulation of bottom up and top down approach merging models while a hybrid approach increases the credibility of cge models in energy policy analysis by replacing the energy sector generic functional forms with a bottom up activity analysis based on specific technologies the endogenous formulation of investment decisions makes an explicit description of evolving specific capital stocks and technology mixes possible both features are essential when assessing effects of policy measures that may be affected by structural change which is typically the case in the long term assessment of energy policy measures

adverse incentives in the taxation of foreigners abstract sovereign policymakers will opt for too much of the public good if their tax falls partially on foreigners they myopically calculate that an increase in public spending is only partially financed by a decrease in home consumption the rest comes from foreign consumption which they do not care about this paper presents an example with seignorage taxes in a two country model with cash in advance constraints the inefficiency is characterized by an inflation bias too much public spending and large fiscal deficits curiously the countries most able to impose such taxes seem to have abstained from doing so

evaluating the empirical evidence for currency substitution a case study of the demand for sterling in europe currency substitution has important implications for the cost of european monetary union if it is significant it will help to reduce costs of convergence to a single currency this paper informs the policy debate by testing for its existence on a consistent european database making use of cointegration methods the results demonstrate that in the two types of models tested there is no clear evidence of currency substitution in either the short or the long run and that therefore currency substitution between sterling and ec currencies cannot be relied upon as a mechanism or an aid to reduce the costs of monetary convergence copyright 1994 by royal economic society

a general equilibrium impact study of the emissions reduction fund in australia by using a national environmental and economic model abstract several climate change policies such as emissions trading schemes and carbon taxes have been implemented in many countries and regions around the world however the current coalition government in australia does not prefer such methods and has argued that these policies would substantially increase the electricity price and weaken the australian competitiveness and the whole economy subsequently the government replaced the carbon tax policy in july 2014 with its emissions reduction fund which fundamentally uses the government budget of a 2 55 billion to buy emission abatements from polluters there are major arguments among the australian public about the efficiency and the effects of this approach but the economic effects are still unidentified this study aims to examine the economy wide effects of this policy on the australian economy by employing a national environmental and economic general equilibrium model so that australians and international audience would be aware of the impacts and how the reverse auction and carbon subsidy work as a policy to reduce emissions at large scales across all sectors in a country results show that australia only experiences relatively small impact on its economy real gdp only declines by 0 3 0 4 over all scenarios industrial and private sectors also experience relatively small unfavourable impacts but the output and export level of the agricultural commodity will decline substantially the renewable sectors are expanded to compensate output reductions in fossil fuel electricity generation sectors though the expansion is insufficient to compensate for the losses

the information content of the interest rate and optimal monetary policy optimal monetary policy rules are derived in a rational expectations cum contracting framework monetary policy is redundant if wage setters exploit the incomplete current information embodied in today s nominal interest rate however the monetary authorities can save wage setters the costs of indexing to the interest rate a contemporaneous money supply feedback rule is as effective as wage indexation a lagged rule relevant under a regime of money supply targeting is also as effective if investors use the interest rate both rules have the same implications for the real interest rate as poole s combination policy however the two rules have strikingly different implications for the nominal interest rate

optimal taxation and optimal tax systems the theory of optimal taxation has for the pas two decades been the reigning normative approach of taxation this paper argues that in its current state optimal tax theory is incomplete as a guide to action concerning many critical issues in tax policy it is incomplete because it has not yet come to terms with taxation as a system of coercively collecting revenues from individuals who will tend to resist the coercive nature of collection taxes implies that the resource cost of implementing a tax system have been and will continue to be a critical determinant of appropriate tax policy the paper first presents the three cornerstone propositions of optimal tax theory and then it discusses the influence of these propositions on recent tax policy developments it concludes by sketching an alternative to optimal taxation called the theory of optimal tax systems which embraces the insights of optimal taxation but also considers the technology of raising taxes and the constraints placed upon tax policy by that technology the optimal tax systems perspective is shown to shed light on the choice of tax instruments the problem of tax evasion and the appropriate tax treatment of capital income this abstract was borrowed from another version of this item

the environmental and economic impact of the emissions trading scheme ets in vietnam abstract this study aims to fill a gap in the literature by examining the impacts of an emissions trading scheme ets in vietnam as the policy has been discussed for a decade in the country but the likely impacts on the economy and different sectors are still unidentified the simulations are carried out in a global energy computable general equilibrium cge model an extension of the gtap e model which treats vietnam as a country region results show that restricting the number of industrial sectors in the emissions trading market substantially affects the country s economy with a decline in real gdp by 4 57 however the country experiences much smaller adverse impacts e g real gdp declines by 1 78 when all industries participate in the emissions trading market in either case of the ets design the coal mining manufacturing transportation and electricity sectors are highly adversely affected however the crude oil and natural gas extraction sectors would experience expansion in their production levels due to substitutions for coal in general under the policy the emission levels from burning fossil fuels decline at significant rates particularly from the electricity generation sector

political solutions to market problems for some market failures serve as a rationale for public intervention however the fact that self interested market behavior does not always produce felicitous social consequences is not sufficient reason to draw this conclusion it is necessary to assess public performance under comparable conditions and hence to analyze self interested political behavior in the institutional structures of the public sector our approach emphasizes this institutional structure warts and all and thereby provides specific cautionary warnings about optimistic reliance on political institutions to improve upon market performance

is the agricultural industry spared from the influence of the australian carbon tax the australian agricultural sector provides food security for the nation and affects the livelihood of farmers and the development of rural communities this sector has been uneasy about the australian carbon tax scheme introduced in july 2012 although the government has exempted the agricultural sector from the scheme by employing a computable general equilibrium model and an environmentally extended social accounting matrix this article simulates the effects of different carbon tax policy scenarios the modeling results show that all agricultural sectors will be affected negatively but to differing degrees the household compensation policy will improve the performance of the poultry and fishing sectors while having opposite effects in the other agricultural sectors the inclusion of the agricultural industry into the carbon tax scheme will lead to a considerable further decrease in output employment and profitability in the agricultural sector and a significant further reduction in real gdp but a much larger emission reduction