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.
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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)
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