Resource taxation and sustainability: A CGE model of the Czech Republic

Resource use by a country is considered in the context of a production relationship. Resources include natural, produced, and human capital. The taxation of each of these resource groups has an impact on the efficient use of these inputs through changes in the relative prices. A computable general equilibrium model (CGE) of the Czech Republic is used to evaluate the impact that various revenue neutral tax structures have on the allocation of economic activity throughout the economy. A Hicksian welfare measure is used to determine the impact on society’s welfare of revenue neutral shifts in taxes. The results demonstrate that the change in the tax structure will result in a welfare improvement by as much as 5% for the Czech Republic. The results provide insight into the role that “getting the prices right” has on sustainability. Although the term “sustainable development” was first introduced in a report by the International Union for the Conservation of Nature and Natural Resources in 1980 it did not gain significant notoriety until the Brundtland Commission report in 1987. For a more detailed discussion see Jamieson, 1998.