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The effect of differentiated emission taxes: does an emission tax favor industry?

Author

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  • Shiro Takeda

    () (Department of Economics, Kanto Gakuen University)

Abstract

Extending a standard 2x2 Heckscher-Ohlin model to incorporate emissions, this paper investigates the effect of differentiated emission taxes on output and emissions in a small open economy. The following results are derived. First, raising the emission tax imposed on one industry may increase the output of that industry. This result is quite surprising in the sense that such a paradoxical result can occur in a simple and standard model under fairly plausible values of parameters. By numerical examples and using a graphical method, it is also shown that the mechanism behind the result is the factor market adjustment effects which work through two different channels. Second, while strengthening emission taxes uniformly across industries always reduces the volume of emissions, strengthening emission tax unevenly may increase it.

Suggested Citation

  • Shiro Takeda, 2005. "The effect of differentiated emission taxes: does an emission tax favor industry?," Economics Bulletin, AccessEcon, vol. 17(3), pages 1-10.
  • Handle: RePEc:ebl:ecbull:eb-04q20009
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    References listed on IDEAS

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    1. Takeda, Shiro, 2001. "The Effects of Differentiated Emission Taxes," Discussion Papers 2001-02, Graduate School of Economics, Hitotsubashi University.
    2. Jota Ishikawa & Kazuharu Kiyono, 2000. "International Trade and Global Warming," CIRJE F-Series CIRJE-F-78, CIRJE, Faculty of Economics, University of Tokyo.
    3. Batra, Raveendra N. & Casas, Francisco R., 1976. "A synthesis of the Heckscher-Ohlin and the neoclassical models of international trade," Journal of International Economics, Elsevier, vol. 6(1), pages 21-38, February.
    4. Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-840, Supplemen.
    5. Brian R. Copeland & M. Scott Taylor, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 755-787.
    6. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275.
    7. Jones, Ronald W. & Easton, Stephen T., 1983. "Factor intensities and factor substitution in general equilibrium," Journal of International Economics, Elsevier, vol. 15(1-2), pages 65-99, August.
    8. Barrett, Scott, 1997. "The strategy of trade sanctions in international environmental agreements," Resource and Energy Economics, Elsevier, vol. 19(4), pages 345-361, November.
    9. Yohe, Gary W., 1979. "The backward incidence of pollution control--some comparative statics in general equilibrium," Journal of Environmental Economics and Management, Elsevier, vol. 6(3), pages 187-198, September.
    10. repec:mes:challe:v:31:y:1988:i:4:p:56-58 is not listed on IDEAS
    11. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
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    Citations

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    Cited by:

    1. Yoshiaki Nakada, 2017. "The energy price - commodity output relationship and the commodity price - commodity output relationship in a three-factor, two-good general equilibrium trade model with imported energy," Papers 1711.10096, arXiv.org.
    2. repec:spr:envpol:v:19:y:2017:i:2:d:10.1007_s10018-016-0163-4 is not listed on IDEAS

    More about this item

    Keywords

    differentiated taxes;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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