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Green tax reforms and habits

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  • de Miguel, Carlos
  • Manzano, Baltasar

Abstract

Using a dynamic general equilibrium model, we explore the role of habit formation when analyzing green tax reforms under the double dividend hypothesis. We assume increases in energy taxes and adjust capital taxation in a revenue-neutral framework to evaluate the effects on welfare. Since the existence of an environmental dividend is uncontroversial, we mainly focus on the efficiency dividend. Our findings show that, when taxes on household energy consumption increase, habits and transitional dynamics alter household decisions, and change the efficiency dividend. However, when the tax increase is on energy used as an input, reform always induces a welfare cost in terms of efficiency. In this case, habits play a less important role.

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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 1 (January)
Pages: 231-246

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Handle: RePEc:eee:resene:v:33:y:2011:i:1:p:231-246

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Web page: http://www.elsevier.com/locate/inca/505569

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Keywords: Green tax reform Habit formation General equilibrium;

References

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Cited by:
  1. de Miguel, Carlos & Manzano, Baltasar, 2011. "Gradual green tax reforms," Energy Economics, Elsevier, vol. 33(S1), pages S50-S58.

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