Expanding biodegradable polymer resin use: Assessing the aggregate impact on the US economy

Abstract This paper assesses the aggregate impact of the substitution of cornstarch-based biodegradable polymer resins for petroleum-based plastic materials and resins on the US economy. The analytical approach used consists of a computable general equilibrium model composed of 14 producing sectors, 14 consuming sectors, 6 household categories classified by income, and a government. The results suggest that for a $1.00 /lb of resin subsidy, the substitution of cornstarch-based biodegradable polymer resins for petroleum-based plastic materials and resins will result in an increase in output by all producing sectors of 0.067% or about $542 million, a rise in the consumption of goods and services of about 0.003% or $110 million, a rise in total utility of 0.004% or $168 million, and a net increase in government expenditures of 0.047% or $369 million. The agricultural sectors would be affected. For example, with a subsidy to promote the substitution of cornstarch-based biodegradable polymer resins for petroleum-based plastic materials and resins, output in the program crops sector (primarily corn) will expand (by about $431 million), output in the livestock sector will increase (by about $27 million), and output in all other agriculture commodities sectors will be increased (by about $192 million). When a larger subsidy of a $3.50 /lb for the production of cornstarch-based biodegradable polymer resins is considered, the effects are comparable to the $1.00/lb subsidy case. The differences between the impacts of the two subsidies are primarily with regard to the order of magnitude of the changes in the equilibrium values of the prices and quantities.