Green Taxes and Double Dividends in a Dynamic Economy
AbstractThis paper examines a revenue neutral green tax reform along the lines of the Double Dividend hypothesis. Using a dynamic general equilibrium model calibrated to the US economy, we find that increasing gasoline taxes and using the revenue to reduce capital income taxes does indeed deliver both types of welfare gains: from higher consumption of market goods (an efficiency dividend), and from a better environmental quality (a green dividend), even though in the new steady state environmental quality may worsen. We also find that, given the available evidence on how much households are willing to pay for improvements in air quality, the size of the green dividend is very small in absolute magnitude, and much smaller than the efficiency dividend.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2006-017.
Length: 41 pages
Date of creation: Nov 2006
Date of revision:
Green taxes; Double Dividends; Capital Accumulation; Welfare;
Other versions of this item:
- Glomm, Gerhard & Kawaguchi, Daiji & Sepulveda, Facundo, 2008. "Green taxes and double dividends in a dynamic economy," Journal of Policy Modeling, Elsevier, vol. 30(1), pages 19-32.
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ACC-2006-11-25 (Accounting & Auditing)
- NEP-ALL-2006-11-25 (All new papers)
- NEP-DGE-2006-11-25 (Dynamic General Equilibrium)
- NEP-ENE-2006-11-25 (Energy Economics)
- NEP-ENV-2006-11-25 (Environmental Economics)
- NEP-PBE-2006-11-25 (Public Economics)
- NEP-PUB-2006-11-25 (Public Finance)
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.:
- Bovenberg, A.L. & Mooij, R.A. de, 1994.
"Environmental levies and distortionary taxation,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-152985, Tilburg University.
- Jason G. Cummins & Kevin A. Hassett & R. Glenn Hubbard, 1994. "A Reconsideration of Investment Behavior Using Tax Reforms as Natural Experiments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 1-74.
- 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.
- Koskela, Erkki & Schob, Ronnie, 1999. "Alleviating unemployment:: The case for green tax reforms," European Economic Review, Elsevier, vol. 43(9), pages 1723-1746, October.
- Cummins, Jason G. & Hassett, Kevin A. & Hubbard, R. Glenn, 1996.
"Tax reforms and investment: A cross-country comparison,"
Journal of Public Economics,
Elsevier, vol. 62(1-2), pages 237-273, October.
- Cummins, J.G. & Hassett, K.A. & Hubbard, R.G., 1995. "tax Reforms and Investment: A Cross-Country Comparison," Working Papers 95-28, C.V. Starr Center for Applied Economics, New York University.
- Jason G. Cummins & Kevin A. Hassett & R. Glenn Hubbard, 1996. "Tax Reforms and Investment: A Cross-Country Comparison," NBER Working Papers 5232, National Bureau of Economic Research, Inc.
- Brookshire, David S, et al, 1982. "Valuing Public Goods: A Comparison of Survey and Hedonic Approaches," American Economic Review, American Economic Association, vol. 72(1), pages 165-77, March.
- Bayindir-Upmann, Thorsten & Raith, Matthias G., 2003. "Should high-tax countries pursue revenue-neutral ecological tax reforms?," European Economic Review, Elsevier, vol. 47(1), pages 41-60, February.
- Jackson, Jerry R., 1979. "Intraurban variation in the price of housing," Journal of Urban Economics, Elsevier, vol. 6(4), pages 464-479, October.
- Zhang, Zhong Xiang, 1998.
"Macroeconomic Effects of CO2 Emission Limits: A Computable General Equilibrium Analysis for China,"
Journal of Policy Modeling,
Elsevier, vol. 20(2), pages 213-250, April.
- ZhongXiang Zhang, 1996. "Macroeconomic Effects of CO2 Emission Limits: A Computable General Equilibrium Analysis for China," Mansholt Working Papers 01-96, Wageningen University, Mansholt Graduate School of Social Sciences.
- Bender, Bruce & Gronberg, Timothy J & Hwang, Hae-Shin, 1980. "Choice of Functional Form and the Demand for Air Quality," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 638-43, November.
- Jorgenson, D.W. & Wilcoxen, P.J., 1992.
"Reducing US Carbon Dioxide Emissions: An Assessment of Different Instruments,"
Harvard Institute of Economic Research Working Papers
1590, Harvard - Institute of Economic Research.
- Jorgenson, Dale W. & Wilcoxen, Peter J., 1993. "Reducing U.S. carbon dioxide emissions: an assessment of different instruments," Journal of Policy Modeling, Elsevier, vol. 15(5-6), pages 491-520.
- A. Bovenberg, 1999. "Green Tax Reforms and the Double Dividend: an Updated Reader's Guide," International Tax and Public Finance, Springer, vol. 6(3), pages 421-443, August.
- Mingche M. Li & H. James Brown, 1980. "Micro-Neighborhood Externalities and Hedonic Housing Prices," Land Economics, University of Wisconsin Press, vol. 56(2), pages 125-141.
- Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
- Smith, V Kerry & Huang, Ju-Chin, 1995. "Can Markets Value Air Quality? A Meta-analysis of Hedonic Property Value Models," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 209-27, February.
- Andrew Atkeson & Patrick J. Kehoe, 1994.
"Models of Energy Use: Putty-Putty versus Putty-Clay,"
NBER Working Papers
4833, National Bureau of Economic Research, Inc.
- Patrick J. Kehoe & Andrew Atkeson, 1999. "Models of Energy Use: Putty-Putty versus Putty-Clay," American Economic Review, American Economic Association, vol. 89(4), pages 1028-1043, September.
- Molly Espey, 1996. "Explaining the Variation in Elasticity Estimates of Gasoline Demand in the United States: A Meta-Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 49-60.
- Kemfert, Claudia & Welsch, Heinz, 2000. "Energy-Capital-Labor Substitution and the Economic Effects of CO2 Abatement: Evidence for Germany," Journal of Policy Modeling, Elsevier, vol. 22(6), pages 641-660, November.
- Judd, Kenneth L, 1987.
"The Welfare Cost of Factor Taxation in a Perfect-Foresight Model,"
Journal of Political Economy,
University of Chicago Press, vol. 95(4), pages 675-709, August.
- Kenneth L. Judd, 1984. "The Welfare Cost of Factor Taxation in a Perfect Foresight Model," Discussion Papers 643, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Chernick, Howard & Reschovsky, Andrew, 1997. "Who Pays the Gasoline Tax?," National Tax Journal, National Tax Association, vol. 50(2), pages 233-59, June Cita.
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
- Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
- Bovenberg, A Lans & Smulders, Sjak A, 1996.
"Transitional Impacts of Environmental Policy in an Endogenous Growth Model,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 861-93, November.
- Bovenberg, A.L. & Smulders, J.A., 1994. "Transitional impact of environmental policy in an endogenous growth model," Discussion Paper 1994-50, Tilburg University, Center for Economic Research.
- Bovenberg, A.L. & Smulders, J.A., 1996. "Transitional impacts of environmental policy in an endogenous growth model," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73103, Tilburg University.
- Thompson, Peter & Taylor, Timothy G, 1995. "The Capital-Energy Substitutability Debate: A New Look," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 565-69, August.
- Bleischwitz, Raimund & Bader, Nikolas, 2010. "Policies for the transition towards a hydrogen economy: the EU case," Energy Policy, Elsevier, vol. 38(10), pages 5388-5398, October.
- de Miguel, Carlos & Manzano, Baltasar, 2011. "Green tax reforms and habits," Resource and Energy Economics, Elsevier, vol. 33(1), pages 231-246, January.
- Gerhard Glomm & Juergen Jung, 2012. "A Macroeconomic Analysis of Energy Subsidies in a Small Open Economy: The Case of Egypt," Caepr Working Papers 2012-006, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
- Giménez, Eduardo L. & Rodríguez, Miguel, 2010. "Reevaluating the first and the second dividends of environmental tax reforms," Energy Policy, Elsevier, vol. 38(11), pages 6654-6661, November.
- Orlov, Anton & Grethe, Harald & McDonald, Scott, 2013. "Carbon taxation in Russia: Prospects for a double dividend and improved energy efficiency," Energy Economics, Elsevier, vol. 37(C), pages 128-140.
- Walid Oueslati, 2013. "Short and Long-term Effects of Environmental Tax Reform," Working Papers 2013.09, Fondazione Eni Enrico Mattei.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Center for Applied Economics and Policy Research).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.