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Environmental taxation in a dualistic economy

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  • RAPANOS, VASSILIS T.

Abstract

In the framework of the Harris–Todaro model we introduce a production–production externality and assume that the activity in the urban sector negatively affects (pollutes) the rural sector. As a means of reducing pollution a tax is imposed on the production of the polluting sector and the distributional and employment effects, as well as the national income aspects of such a tax, are explored. We take two versions of the Harris–Todaro model, the short run, where only labour is mobile between the rural and the urban sector, and the longer run, where all factors of production are intersectorally mobile. Our findings indicate that taxation will reduce pollution, may favour employment in the rural sector, and under certain conditions will also reduce unemployment, particularly in the longer run. National income will be generally enhanced if the share of the agricultural output in national income is higher than the share of manufactures.

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  • Rapanos, Vassilis T., 2007. "Environmental taxation in a dualistic economy," Environment and Development Economics, Cambridge University Press, vol. 12(1), pages 73-89, February.
    • Handle: RePEc:cup:endeec:v:12:y:2007:i:01:p:73-89_00
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    Cited by:

    1. Leonard F.S. Wang & Ya-Chin Wang & Lihong Zhao, 2012. "The incidence of environmental regulation in a developing economy with sector-specific unemployment: a note," Economics and Business Letters, Oviedo University Press, vol. 1(1), pages 3-11.
    2. Sheng-Huei Ko & Kuo-Hsing Kuo & Cheng-Te Lee & Chen Fang, 2017. "Environmental Tax And Return Urban–Rural Migration," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(02), pages 447-458, June.
    3. Kuo†Hsing Kuo & Cheng†Te Lee & Shang†Fen Wu, 2018. "Environmental Policy And Labour Market Imperfection," Bulletin of Economic Research, Wiley Blackwell, vol. 70(2), pages 175-184, April.
    4. Pan, Lijun & Zhou, Yu, 2013. "International factor mobility, environmental pollution and skilled–unskilled wage inequality in developing countries," Economic Modelling, Elsevier, vol. 33(C), pages 826-831.
    5. Daitoh, Ichiroh & Tarui, Nori, 2022. "Open access renewable resources, urban unemployment, and the resolution of dual institutional failures," Environment and Development Economics, Cambridge University Press, vol. 27(4), pages 316-332, August.
    6. Yunyun Wu & Xiaochun Li, 2021. "International factor mobility and environment in a dual agricultural economy," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 75-89, February.
    7. Ichiroh Daitoh & Nori Tarui, 2016. "Open-access Renewable Resources and Urban Unemployment: Dual Institutional Failures in a Small Open Economy," Keio-IES Discussion Paper Series 2016-009, Institute for Economics Studies, Keio University.

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