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Environmental tax reform and induced technological change

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  • YAMAGAMI, Hiroaki
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    Abstract

    This paper examines the importance of induced technological change in considering the efficiency costs of environmental policy. In particular, in modeling an endogenous formation of energy-saving technology through a variety of intermediates, the paper studies the welfare effects of environmental tax reform in a general equilibrium model. Using this model, the paper shows that environmental tax reform induces an expansion of the variety of intermediates by increasing rents from innovating new intermediates and, thereby, brings technological change. Then, the induced variety expansion by environmental tax reform achieves positive externalities and plays an important role both to decrease the efficiency costs and to improve the environmental quality.

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    File URL: http://mpra.ub.uni-muenchen.de/46516/
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    File URL: http://mpra.ub.uni-muenchen.de/47178/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46516.

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    Date of creation: Apr 2013
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    Handle: RePEc:pra:mprapa:46516

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    Related research

    Keywords: Double dividend; Energy saving; Environmental tax reform; Induced technological change; Tax-interaction effect;

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    1. Löschel, Andreas, 2001. "Technological change in economic models of environmental policy: a survey," ZEW Discussion Papers 01-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
    3. Parry, Ian W. H. & Bento, Antonio M., 2000. "Tax Deductions, Environmental Policy, and the "Double Dividend" Hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 67-96, January.
    4. Williams, Roberton III, 2002. "Environmental Tax Interactions when Pollution Affects Health or Productivity," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 261-270, September.
    5. Hiroaki Yamagami, 2009. "Health Effects, Tax Deductions for Medical Expenditure, and the Double Dividend," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 65(1), pages 105-121, March.
    6. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
    7. A.L. Bovenberg & Lawrence H. Goulder & Derek J. Gurney, 2003. "Efficiency Costs of Meeting Industry-Distributional Constraints under Environmental Permits and Taxes," NBER Working Papers 10059, National Bureau of Economic Research, Inc.
    8. Goulder, Lawrence H. & Schneider, Stephen H., 1999. "Induced technological change and the attractiveness of CO2 abatement policies," Resource and Energy Economics, Elsevier, Elsevier, vol. 21(3-4), pages 211-253, August.
    9. 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.
    10. A. Bovenberg, 1999. "Green Tax Reforms and the Double Dividend: an Updated Reader's Guide," International Tax and Public Finance, Springer, Springer, vol. 6(3), pages 421-443, August.
    11. Smulders, Sjak & de Nooij, Michiel, 2003. "The impact of energy conservation on technology and economic growth," Resource and Energy Economics, Elsevier, Elsevier, vol. 25(1), pages 59-79, February.
    12. David Popp & Richard G. Newell & Adam B. Jaffe, 2009. "Energy, the Environment, and Technological Change," NBER Working Papers 14832, National Bureau of Economic Research, Inc.
    13. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
    14. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
    15. Bento, Antonio M. & Jacobsen, Mark, 2007. "Ricardian rents, environmental policy and the `double-dividend' hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 17-31, January.
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