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Environmental Tax Reform and Endogenous Growth

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Author Info
Bovenberg, A.L.
Mooij, R.A. de (Tilburg University, Center for Economic Research)

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Abstract

This paper explores the effects of an environmental tax reform on pollution, economic growth and welfare in an endogenous growth model with pre-existing tax distortions. We find that a shift in the tax mix away from output towards pollution may raise economic growth through two channels. The first channel is an environmental production externality, which determines the positive effect of lower aggregate pollution on the productivity of capital. The second channel is a shift in the tax burden away from the net return on investment towards profits. The paper also shows that, if tax shifting towards profits is large and environmental amenities are unimportant, the optimal tax on pollution may exceed its Pigovian level.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 98.

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Date of creation: 1994
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Handle: RePEc:dgr:kubcen:199498

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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 & de Mooij, Ruud A, 1997. "Environmental Levies and Distortionary Taxation: Reply," American Economic Review, American Economic Association, vol. 87(1), pages 252-53, March. [Downloadable!] (restricted)
  2. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June. [Downloadable!] (restricted)
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  3. Butter, F.A.G. den & Hofkes, M.W., 1993. "Sustainable development with extractive and non-extractive use of the environment in production," Serie Research Memoranda 0055, Free University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
    Other versions:
  4. Bovenberg, A.L. & Smulders, S., 1993. "Environmental Quality and Pollution-Saving Technological Change in Two- Sector Endogenous Growth Model," Papers 9321, Tilburg - Center for Economic Research.
  5. van Marrewijk, Charles & van der Ploeg, Federick & Verbeek, Jos, 1993. "Is growth bad for the environment? Pollution, abatement, and endogenous growth," Policy Research Working Paper Series 1151, The World Bank. [Downloadable!]
  6. 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)
  7. Smulders, Sjak & Gradus, Raymond, 1996. "Pollution abatement and long-term growth," European Journal of Political Economy, Elsevier, vol. 12(3), pages 505-532, November. [Downloadable!] (restricted)
  8. 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)
  9. Beate Grundig, 2008. "Why is the share of women willing to work in East Germany larger than in West Germany? A logit model of extensive labour supply decision," CESifo Working Paper Series Ifo Working Paper No. 56, CESifo GmbH. [Downloadable!]
  10. 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. Steve Cassou & Arantza Gorostiaga & María José Gutiérrez & Stephen Hamilton, 2006. "Second-best tax policy in a growing economy with externalities," DFAEII Working Papers 200603, University of the Basque Country - Department of Foundations of Economic Analysis II. [Downloadable!]
  2. Laura Marsiliani & Thomas Renstrom, 2002. "Inequality, Environmental Protection and Growth," Wallis Working Papers WP35, University of Rochester - Wallis Institute of Political Economy. [Downloadable!]
  3. Chia-Ying Chang & Chien-Chieh Huang & Ping Wang, 1999. "Fight Fire with Fire: A Model of Pollution and Growth with Cooperative Settlement," Working Papers 0010, Department of Economics, Vanderbilt University, revised Apr 2000. [Downloadable!]
  4. Esther Fernández & Rafaela Pérez Sánchez & Jesús Ruiz, 2004. "Double Dividend in an Endogenous Growth Model with Pollution and Abatement," Economic Working Papers at Centro de Estudios Andaluces E2004/15, Centro de Estudios Andaluces. [Downloadable!]
  5. Marsiliani, L. & Renstroem, T.I., 2000. "Inequality, environmental protection and growth," Discussion Paper 34, Tilburg University, Center for Economic Research. [Downloadable!]
  6. John Pezzey & Andrew Park, 1998. "Reflections on the Double Dividend Debate," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 539-555, April. [Downloadable!] (restricted)
  7. Boone, J. & Bovenberg, L., 2000. "Optimal labour taxation and search," Discussion Paper 17, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  8. Don Fullerton & Seung-Rae Kim, 2006. "Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth," NBER Working Papers 12070, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Francesco Ricci, 2004. "Channels of Transmission of Environmental Policy to Economic Growth: A Survey of the Theory," Working Papers 2004.52, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  10. Marsiliani, Laura & Renström, Thomas I, 2003. "Inequality, Environmental Protection and Growth," CEPR Discussion Papers 3754, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Smulders, S., 1997. "Should environmental standards be tighter if technological change is endogenous?," Discussion Paper 79, Tilburg University, Center for Economic Research. [Downloadable!]
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