Environmental taxes and labor-market distortions
It is sometimes argued that by using the revenues from environmental taxes to reduce distortionary taxes on labor, governments can reap a ‘double dividend’, namely, not only an improvement in environmental quality, but also a reduction in the efficiency costs associated with raising public revenue. By employing a general equilibrium model, this paper finds that, contrary to common wisdom, environmental taxes typically render the overall tax system a less efficient instrument to finance public spending. Furthermore, high estimates for the marginal efficiency costs of existing taxes weaken, rather than strengthen, the case for environmental taxes.
|Keywords||Double dividend, Environmental tax, Excess burden, Second best|
de Mooij, R.A., & Bovenberg, A.L.. (1994). Environmental taxes and labor-market distortions. European Journal of Political Economy, 655–683. Retrieved from http://hdl.handle.net/1765/1948