The Political Sustainability of Germany's Environmental Tax Rate
AbstractWe analyze the German ecotax package in a model of overlapping generations and majority voting. The package consists of the ecotax rate and the budgetary rule which assigns a fraction of the tax revenue to the reduction of pension contributions while holding pension benefits constant. The old and the young generation have different preferences with respect to the tax rate and the use of the tax revenue. Our theoretical model as well as the calibration of our model show that the median voter s preferred tax rate may well exceed the efficient tax rate whenever his income is sufficiently high. This is the likelier the more CO2 is degraded and removed from the atmosphere. Furthermore, the median voter prefers earmarking of tax revenue to reductions in pension contributions. The latter is quite an accurate prediction of the situation in Germany where the share of tax revenue devoted to the pension scheme amounts to more than 90%. --
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Bibliographic InfoPaper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century with number 62060.
Date of creation: 2012
Date of revision:
Other versions of this item:
- Roeder, Kerstin & Habla, Wolfgang, 2012. "The Political Sustainability of Germany’s Environmental Tax Rate," Munich Reprints in Economics 19746, University of Munich, Department of Economics.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-01-12 (Economics of Ageing)
- NEP-ALL-2013-01-12 (All new papers)
- NEP-DGE-2013-01-12 (Dynamic General Equilibrium)
- NEP-ENE-2013-01-12 (Energy Economics)
- NEP-ENV-2013-01-12 (Environmental Economics)
- NEP-PBE-2013-01-12 (Public Economics)
- NEP-POL-2013-01-12 (Positive Political Economics)
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