Estimates from a consumer demand system: implications for the incidence of environmental taxes
AbstractMost studies suggest that environmental taxes are regressive, and thus are unattractive policy options. We consider the distributional effects of a gasoline tax increase using three welfare measures and under three scenarios for gas tax revenue use. To incorporate behavioral responses we use Consumer Expenditure Survey data to estimate a consumer demand system that includes gasoline, other goods, and leisure. We find that the gas tax is regressive, but that returning the revenue through a lump-sum transfer more than offsets this, yielding a net increase in progressivity. We also find that ignoring behavioral changes in distributional calculations overstates both the overall burden of the tax and its regressivity.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 47 (2004)
Issue (Month): 3 (May)
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Web page: http://www.elsevier.com/locate/inca/622870
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- Sarah E. West & Roberton C. Williams III, 2002. "Estimates from a Consumer Demand System: Implications for the Incidence of Environmental Taxes," NBER Working Papers 9152, National Bureau of Economic Research, Inc.
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