Pollution and Capital Tax Competition within a Regional Block
AbstractThe paper examines the interaction among taxes on factors income, environmental quality and welfare. We construct a two-country regional block model with capital mobility and cross-border pollution. Pollution in the two countries is simultaneously abated by the private sector, in response to a pollution tax and by the public sector utilizing income and pollution tax revenue. We demonstrate, among other things, that due to the existence of cross-border pollution in many cases the Nash optimal policy on capital income is a positive tax, even if taxes on the income of immobile factors are chosen optimally. This tax rate increases with the degree of cross-border pollution.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1208.
Date of creation: 2004
Date of revision:
optimal income taxes; public pollution abatement; cross-border pollution; capital mobility;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-07-04 (All new papers)
- NEP-ENV-2004-07-04 (Environmental Economics)
- NEP-PBE-2004-07-04 (Public Economics)
- NEP-PUB-2004-07-26 (Public Finance)
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