Environmental taxes in the long run
AbstractThe efficiency of the Pigouvian tax suggests that price-based regulation is the proper benchmark for efficient regulation. However, results due to Carlton and Loury (1980, 1986) question this; when harm depends on scale effects a pure Pigou tax is inefficient regulation in the long run. In this note we make precise that there is an efficient tax scheme for controlling harm as long as social optimum exists. In particular, the efficient tax scheme is based on a tax rate equal to marginal harm. Hence, price regulation is the right benchmark for regulation even in the presence of scale effects in the harm function. --
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2013-29.
Date of creation: 2013
Date of revision:
externalities; scale effects; Pigou-taxes;
Find related papers by JEL classification:
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-05-11 (Accounting & Auditing)
- NEP-ALL-2013-05-11 (All new papers)
- NEP-ENE-2013-05-11 (Energy Economics)
- NEP-ENV-2013-05-11 (Environmental Economics)
- NEP-PBE-2013-05-11 (Public Economics)
- NEP-RES-2013-05-11 (Resource Economics)
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