Environmental policy, tax incidence, and the cost of public funds
AbstractThis paper studies under what conditions a âdouble dividendâ may occur in the sense that both environmental quality and employment rise. A simple static general equilibrium model is employed in which tax policy faces the dual task of internalising a negative environmental externality and raising revenue to finance public consumption. The model features a clearing labour market with both labour demand and supply and a fixed factor of production (e.g. capital). Hence, we can study tax incidence and its effect on employment, environmental quality, and the marginal cost of public funds. It is shown for the case of an upward sloping labour supply curve and less than full tax shifting by employers that a shift towards greener preferences cannot yield a double dividend, even if the fixed factor is important. However, if labour supply curve bends backwards, more environmental concern confers a double dividend. Copyright Kluwer Academic Publishers 1999
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Bibliographic InfoPaper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-376255.
Date of creation: 1999
Date of revision:
Publication status: Published in Environmental and Resource Economics (1999) v.13, p.187-207
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Other versions of this item:
- Jenny Ligthart & Frederick Van Der Ploeg, 1999. "Environmental Policy, Tax Incidence, and the Cost of Public Funds," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(2), pages 187-207, March.
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