Environmental Levies, Distortionary Taxation and Increasing Returns
AbstractIn this note, we introduce increasing returns to Bovenberg and Mooij's (1994) model as generalised in Fullerton (1997) and use an example to show that (1) even with a distortionary labor tax, the optimal environmental levy is greater than the Pigouvian rate; (2) the difference between tax on the "dirty" good and the "clean" good is also greater than the Pigouvian tax; (3) under certain circumstances, the government can optimally use the environmental levy to both meet its revenue requirement and subsidize the "clean" goods with increasing returns.
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Bibliographic InfoPaper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 10-14.
Length: 9 pages
Date of creation: Apr 2014
Date of revision:
Contact details of provider:
Postal: Department of Economics, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/eco/
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Find related papers by JEL classification:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2014-04-18 (Accounting & Auditing)
- NEP-ALL-2014-04-18 (All new papers)
- NEP-ENV-2014-04-18 (Environmental Economics)
- NEP-PBE-2014-04-18 (Public Economics)
- NEP-PUB-2014-04-18 (Public Finance)
- NEP-RES-2014-04-18 (Resource Economics)
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