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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. 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!]
  3. 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)
  4. Lans Bovenberg & Frederick van der Ploeg, 1994. "Consequences of Environmental Tax Reform for Involuntary Unemployment and Welfare," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich.
  5. 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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  6. 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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  7. 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, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
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  8. 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.
  9. 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)
  10. 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)
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