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A Second-Best Analysis of Environmental Subsidies

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Author Info
Ian Parry

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Abstract

This paper examines the complications posed by pre-existing tax distortions in the economy, for the evaluation of a variety of subsidy policies that affect the environment. These complications include not only the efficiency cost of financing the subsidy by distortionary taxation, but also the interaction effects between the subsidized market and markets with pre-existing taxes. Studies that ignore both of these effects, or only incorporate the first type of effect, can be highly misleading. Copyright Kluwer Academic Publishers 1998

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File URL: http://hdl.handle.net/10.1023/A:1008638320593
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Publisher Info
Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 5 (1998)
Issue (Month): 2 (May)
Pages: 153-170
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Handle: RePEc:kap:itaxpf:v:5:y:1998:i:2:p:153-170

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Web page: http://www.springerlink.com/link.asp?id=102915

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Related research
Keywords: externalities; subsidies; pre-existing taxes; welfare impacts;

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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. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March. [Downloadable!] (restricted)
  2. Wildasin, David E, 1984. "On Public Good Provision with Distortionary Taxation," Economic Inquiry, Oxford University Press, vol. 22(2), pages 227-43, April.
  3. Larsen, Bjorn & Shah, Anwar & DEC, 1992. "World fossil fuel subsidies and global carbon emissions," Policy Research Working Paper Series 1002, The World Bank. [Downloadable!]
  4. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November. [Downloadable!] (restricted)
  5. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March. [Downloadable!] (restricted)
  6. Gupta, Sanjeev & Miranda, Kenneth & Parry, Ian, 1995. "Public expenditure policy and the environment: A review and synthesis," World Development, Elsevier, vol. 23(3), pages 515-528, March. [Downloadable!] (restricted)
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  7. 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)
  8. Ballard, Charles L & Fullerton, Don, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-31, Summer. [Downloadable!] (restricted)
    Other versions:
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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. Don Fullerton & Gilbert Metcalf, 1997. "Environmental Controls, Scarcity Rents, and Pre-Existing Distortions," NBER Working Papers 6091, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Parry, Ian, 2003. "Fiscal Interactions and the Case for Carbon Taxes over Grandfathered Carbon Permits," Discussion Papers dp-03-46, Resources For the Future. [Downloadable!]
    Other versions:
  3. Maia David & Bernard Sinclair-Desgagné, 2007. "Revisiting the environmental subsidy in the presence of an eco-industry," Working Papers hal-00243054_v1, HAL. [Downloadable!]
  4. Jean-Christophe Caffet, 2005. "Health effects and optimal environmental taxes in welfare state countries," Cahiers de la Maison des Sciences Economiques v05049, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  5. Stéphan Marette & Jutta Roosen & Sandrine Blanchemanche, 2008. "Taxes and subsidies to change eating habits when information is not enough: an application to fish consumption," Journal of Regulatory Economics, Springer, vol. 34(2), pages 119-143, October. [Downloadable!] (restricted)
  6. Parry, Ian W.H. & Goulder, Lawrence H., 2008. "Instrument Choice in Environmental Policy," Discussion Papers dp-08-07, Resources For the Future. [Downloadable!]
    Other versions:
  7. Parry, Ian, 1997. "Agricultural Policies in the Presence of Distorting Taxes," Discussion Papers dp-98-05, Resources For the Future. [Downloadable!]
  8. Parry, Ian, 2001. "On the Efficiency of Public and Private Health Care Systems: An Application to Alternative Health Policies in the United Kingdom," Discussion Papers dp-01-07, Resources For the Future. [Downloadable!]
  9. Don Fullerton & Robert D. Mohr, 2003. "Suggested Subsidies are Sub-optimal Unless Combined with an Output Tax," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
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