The effects of increasing biodegradable polymer resin use on the U.S. economy

The analysis in this paper examines the effects of the substitution of cornstarch-based biodegradable polymer resins for petroleum-based plastic materials and resins on the U.S. economy. The analytical approach used in the study consists of a computable general equilibrium model composed of 14 producing sectors, 14 consuming sectors, six household categories classified by income and a government. The results suggest that, for a $1.00 per pound 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 by about 0.003% or $110 million, a rise in total utility by 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 the all-other agriculture commodities sector will be increased (by about $19 million). When a larger subsidy of $3.50 per pound for the production of cornstarch-based biodegradable polymer resins is considered, the effects are comparable to the $1.00 per pound 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.