Basharat A.K. Pitafi () (Department of Economics, University of Hawaii at Manoa) James A. Roumasset () (Department of Economics, University of Hawaii at Manoa)
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Several authors have argued that the second-best environmental tax on a “dirty good” is less than marginal emission damage associated with its consumption. These studies limit their analysis to cases in which emissions can only be reduced by a reduction of the dirty good. With a more general specification that allows abatement through input substitution, we show that the direct emissions tax cannot be less than marginal emission damage, regardless of the normalization.
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number
200208.
Find related papers by JEL classification: D62 - Microeconomics - - Welfare Economics - - - Externalities H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
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