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From regressive pollution taxes to progressive environmental tax reforms

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  • Chiroleu-Assouline, Mireille
  • Fodha, Mouez

Abstract

European countries have increased their use of environmental tax instruments by designing new tax bases. But many countries face opposition from public opinion, for fear of the distributive consequences of these environmental tax reforms. This paper sheds light on the distributive consequences of environmental tax policies when households are heterogeneous. The objective is to assess whether an environmental tax reform could be Pareto improving, when the revenue of the pollution tax is recycled by a change in labor tax properties. We show that, whatever the degree of regressivity of the environmental tax alone, it is possible to design a recycling mechanism that renders the tax reform more Pareto efficient, by simultaneously decreasing the wage tax and increasing its progressivity.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 69 (2014)
Issue (Month): C ()
Pages: 126-142

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Handle: RePEc:eee:eecrev:v:69:y:2014:i:c:p:126-142

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Web page: http://www.elsevier.com/locate/eer

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Keywords: Environmental tax reform; Heterogeneity; Welfare analysis; Tax progressivity;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. On the distributional effect of environmental taxes
    by Economic Logician in Economic Logic on 2012-09-10 14:27:00
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Cited by:
  1. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2014. "Environmental Policies under Debt Constraint," Working Papers halshs-01023798, HAL.

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