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On Cost Benefit Rules for Green Taxes

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Author Info
Thomas Aronsson
Abstract

This paper concerns the welfare effects of a green tax reform in a dynamic general equilibrium model with preexisting taxes on labor income and capital income. In comparison with previous studies on green taxes in dynamic models, which have focused their main attention on long run effects of such reforms, I derive cost benefit rules for a change in the tax mix by using the properties of the value function in optimal control theory. This enables me to relate the welfare effect of a change in the tax mix to responses in employment, the capital stock, (flow) emissions and the stock of pollution along the whole general equilibrium path. Another contribution of the paper is to examine under what conditions an emission tax, which is set permanently below the marginal damage of pollution, is welfare superior to an emission tax path that fully internalizes the external effect. Copyright Kluwer Academic Publishers 1999

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File URL: http://hdl.handle.net/10.1023/A:1008253417906
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Publisher Info
Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 13 (1999)
Issue (Month): 1 (January)
Pages: 31-43
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Handle: RePEc:kap:enreec:v:13:y:1999:i:1:p:31-43

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Related research
Keywords: green taxes; intertemporal general equilibrium; preexisting tax distortions;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bovenberg, A Lans & van der Ploeg, Frederick, 1994. " Green Policies and Public Finance in a Small Open Economy," Scandinavian Journal of Economics, Blackwell Publishing, vol. 96(3), pages 343-63.
  2. Bovenberg, A Lans & Smulders, Sjak A, 1996. "Transitional Impacts of Environmental Policy in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 861-93, November.
  3. Chamley, Christophe, 1985. "Efficient Taxation in a Stylized Model of Intertemporal General Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 451-68, June. [Downloadable!] (restricted)
  4. Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November. [Downloadable!] (restricted)
  5. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, vol. 86(4), pages 985-1000, September. [Downloadable!] (restricted)
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  6. Lans Bovenberg, A. & de Mooij, Ruud A., 1997. "Environmental tax reform and endogenous growth," Journal of Public Economics, Elsevier, vol. 63(2), pages 207-237, January. [Downloadable!] (restricted)
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  7. Turnovsky, Stephen J, 1992. "Alternative Forms of Government Expenditure Financing: A Comparative Welfare Analysis," Economica, London School of Economics and Political Science, vol. 59(234), pages 235-52, May. [Downloadable!] (restricted)
  8. Bovenberg, A Lans & van der Ploeg, Frederick, 1992. "Environmental Policy, Public Finance and the Labour Market in a Second-best World," CEPR Discussion Papers 745, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Aronsson, Thomas & Blomquist, Sören, 2000. "Optimal Taxation, Global Externalities and Labor Mobility," Working Paper Series 2000:15, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  2. Blomquist, Sören & Aronsson, Thomas, 1999. "On Environmental Taxation under Uncertainty," Working Paper Series 1999:14, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  3. Aronsson, Thomas & Löfgren, Karl-Gustaf & Sjögren, Tomas, 2002. "A Note on Environmental Policy Reform, Distortionary Taxation and Imperfect Competition," UmeÃ¥ Economic Studies 600, Umeå University, Department of Economics. [Downloadable!]
  4. Mota, Rui Pedro & Domingos, Tiago, 2006. "Welfare effects of green tax reforms in one sector and two sector dynamic economies," MPRA Paper 13346, University Library of Munich, Germany. [Downloadable!]
  5. Aronsson, Thomas & Persson, Lars & Sjögren, Tomas, 2006. "Optimal Taxation and Transboundary Externalities - Are Endogenous World Market Prices Important?," UmeÃ¥ Economic Studies 699, Umeå University, Department of Economics. [Downloadable!]
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