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Pollution, Capital Mobility and Tax Policies with Unemployment

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Author Info
Nikos Tsakiris
Panos Hatzipanayotou
Michael S. Michael

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Abstract

In this paper we highlight aspects related to the links among unemployment, international capital mobility, and tax policies in a small open developing economy. Without international capital mobility, the joint optimal trade and environmental policies require a zero tariff and an emission tax lower than the Pigouvian tax. With international capital mobility and a capital tax (subsidy), the optimal emission tax rate is smaller (larger) compared to the rate when capital is untaxed. When both the emission tax and the capital tax/subsidy are jointly chosen optimally, then the optimal policy on capital is a lower subsidy, or even a tax, compared to the standard capital subsidy of the no pollution case. Copyright © 2007 The Authors.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9361.2007.00383.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Development Economics.

Volume (Year): 12 (2008)
Issue (Month): 2 (05)
Pages: 223-236
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Handle: RePEc:bla:rdevec:v:12:y:2008:i:2:p:223-236

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