From Shadow to Green: Linking Environmental Fiscal Reforms and the Informal Economy
AbstractIn the past few decades many papers have analysed in some depth different environmental tax reforms and the double dividend hypothesis, i.e. the possibility of improving not only the environment but also the economy through the reduction of distortions in the tax system. Recently, more stress has been placed on testing empirically what effects a reduction in labour taxes may have on unemployment when accompanied by a carbon or other environmental tax. However, such studies have not modelled the effects of the presence of a shadow economy, even though informal markets account for a significant and growing part of GDP in many developed economies. This paper analyses this link using an Applied General Equilibrium model for the case of Spain, which has one of the highest unemployment rates in the world and one of the biggest informal economies of any wealthy country. We conclude that our analysis strengthens the case for an environmental tax reform in Spain if revenues from a CO2 tax are recycled via a labour tax reduction.
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Bibliographic InfoPaper provided by BC3 in its series Working Papers with number 2012-03.
Date of creation: Mar 2012
Date of revision:
Publication status: Published
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Environmental fiscal reform; double dividend hypothesis; shadow economy; unemployment; general equilibrium analysis; Spain;
Other versions of this item:
- Markandya, Anil & González-Eguino, Mikel & Escapa, Marta, 2013. "From shadow to green: Linking environmental fiscal reforms and the informal economy," Energy Economics, Elsevier, vol. 40(S1), pages S108-S118.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-10 (All new papers)
- NEP-ENE-2012-04-10 (Energy Economics)
- NEP-ENV-2012-04-10 (Environmental Economics)
- NEP-IUE-2012-04-10 (Informal & Underground Economics)
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