IDEAS home Printed from https://ideas.repec.org/a/eee/inteco/v150y2017icp80-95.html
   My bibliography  Save this article

Energy taxes, reforms and income inequality: An empirical cross-country analysis

Author

Listed:
  • Oueslati, Walid
  • Zipperer, Vera
  • Rousselière, Damien
  • Dimitropoulos, Alexandros

Abstract

Environmentally-motivated taxes on energy products can effectively induce households and firms to take into account the environmental externalities of energy transformation and use. The levy of such taxes is, however, often hampered by public concerns over possible distributional effects. This paper analyses the macroeconomic relationship between taxes on energy products and income inequality. It also investigates whether this relationship is different in cases where explicit mechanisms to shift tax burden from labour and income to environmentally harmful activities have been established. In contrast to earlier empirical studies which analyse the distributional effects of energy taxes on the uses of household income, this paper focuses on their macroeconomic relationship with income sources. Using a panel of 34 OECD countries from 1995 to 2011, the paper shows that in the absence of explicit tax revenue recycling mechanisms there is a positive, although modest, relationship between the share of revenues from energy taxes in GDP and the Gini coefficient, which is the adopted measure of income inequality. In contrast, where such mechanisms have been implemented, there is an inverse and relatively stronger relationship between the share of energy tax revenues in GDP and inequality in income sources.

Suggested Citation

  • Oueslati, Walid & Zipperer, Vera & Rousselière, Damien & Dimitropoulos, Alexandros, 2017. "Energy taxes, reforms and income inequality: An empirical cross-country analysis," International Economics, Elsevier, vol. 150(C), pages 80-95.
  • Handle: RePEc:eee:inteco:v:150:y:2017:i:c:p:80-95
    DOI: 10.1016/j.inteco.2017.01.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2110701716300890
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. José De Gregorio & Jong–Wha Lee, 2002. "Education and Income Inequality: New Evidence From Cross‐Country Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(3), pages 395-416, September.
    2. Jorge Martínez-Vázquez & Violeta Vulovic & Blanca Moreno Dodson, 2012. "The Impact of Tax and Expenditure Policies on Income Distribution: Evidence from a Large Panel of Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 95-130, March.
    3. Mathur, Aparna & Morris, Adele C., 2014. "Distributional effects of a carbon tax in broader U.S. fiscal reform," Energy Policy, Elsevier, vol. 66(C), pages 326-334.
    4. Callan, Tim & Lyons, Sean & Scott, Susan & Tol, Richard S.J. & Verde, Stefano, 2009. "The distributional implications of a carbon tax in Ireland," Energy Policy, Elsevier, vol. 37(2), pages 407-412, February.
    5. Abdullah, Sabah & Morley, Bruce, 2014. "Environmental taxes and economic growth: Evidence from panel causality tests," Energy Economics, Elsevier, vol. 42(C), pages 27-33.
    6. Chu, K.-y. & Davoodi, H. & Gupta, S., 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," Research Paper 214, World Institute for Development Economics Research.
    7. Christina D. Romer & David Romer, 1999. "Monetary policy and the well-being of the poor," Economic Review, Federal Reserve Bank of Kansas City, vol. 84(Q I), pages 21-49.
    8. Arellano, Manuel, 1993. "On the testing of correlated effects with panel data," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 87-97, September.
    9. Wei Pan, 2001. "Akaike's Information Criterion in Generalized Estimating Equations," Biometrics, The International Biometric Society, vol. 57(1), pages 120-125, March.
    10. Vandyck, Toon & Van Regemorter, Denise, 2014. "Distributional and regional economic impact of energy taxes in Belgium," Energy Policy, Elsevier, vol. 72(C), pages 190-203.
    11. Bureau, Benjamin, 2011. "Distributional effects of a carbon tax on car fuels in France," Energy Economics, Elsevier, vol. 33(1), pages 121-130, January.
    12. Watson, Dorothy & Maître, Bertrand, 2013. "Social Transfers and Poverty Alleviation in Ireland, 2004-2011," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT248, December.
    13. Carlos Mulas-Granados, 2005. "Fiscal Adjustments and the Short-Term Trade-Off between economic growth and equality," Hacienda Pública Española, IEF, vol. 172(1), pages 61-92, June.
    14. Speck, Stefan, 1999. "Energy and carbon taxes and their distributional implications," Energy Policy, Elsevier, vol. 27(11), pages 659-667, October.
    15. Luca Agnello & Ricardo M. Sousa, 2012. "Fiscall Adjustments and Income Inequality:A First Assessment," NIPE Working Papers 19/2012, NIPE - Universidade do Minho.
    16. Davlasheridze, Meri & Fisher-Vanden, Karen & Allen Klaiber, H., 2017. "The effects of adaptation measures on hurricane induced property losses: Which FEMA investments have the highest returns?," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 93-114.
    17. Don Fullerton, 2011. "Six Distributional Effects of Environmental Policy," Risk Analysis, John Wiley & Sons, vol. 31(6), pages 923-929, June.
    18. Don Fullerton & Garth Heutel, 2010. "The General Equilibrium Incidence of Environmental Mandates," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 64-89, August.
    19. Sylvie Charlot & Riccardo Crescenzi & Antonio Musolesi, 2015. "Econometric modelling of the regional knowledge production function in Europe," Journal of Economic Geography, Oxford University Press, vol. 15(6), pages 1227-1259.
    20. Rausch, Sebastian & Metcalf, Gilbert E. & Reilly, John M., 2011. "Distributional impacts of carbon pricing: A general equilibrium approach with micro-data for households," Energy Economics, Elsevier, vol. 33(S1), pages 20-33.
    21. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    22. Ekins, Paul & Pollitt, Hector & Barton, Jennifer & Blobel, Daniel, 2011. "The implications for households of environmental tax reform (ETR) in Europe," Ecological Economics, Elsevier, vol. 70(12), pages 2472-2485.
    23. Ronald J. Sutherland, 2006. "The Distributional Effects of Direct Regulation: A Case Study of Energy Efficiency Appliance Standards," Chapters, in: Ysé Serret & Nick Johnstone (ed.), The Distributional Effects of Environmental Policy, chapter 5, Edward Elgar Publishing.
    24. Wier, Mette & Birr-Pedersen, Katja & Jacobsen, Henrik Klinge & Klok, Jacob, 2005. "Are CO2 taxes regressive? Evidence from the Danish experience," Ecological Economics, Elsevier, vol. 52(2), pages 239-251, January.
    25. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    26. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    27. Michelle Harding, 2014. "The Diesel Differential: Differences in the Tax Treatment of Gasoline and Diesel for Road Use," OECD Taxation Working Papers 21, OECD Publishing.
    28. Muinelo-Gallo, Leonel & Roca-Sagalés, Oriol, 2013. "Joint determinants of fiscal policy, income inequality and economic growth," Economic Modelling, Elsevier, vol. 30(C), pages 814-824.
    29. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 157-183, August.
    30. Giovanni S. F. Bruno, 2005. "Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals," Stata Journal, StataCorp LP, vol. 5(4), pages 473-500, December.
    31. Luca Agnello & Ricardo M. Sousa, 2014. "How Does Fiscal Consolidation Impact on Income Inequality?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 702-726, December.
    32. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242, June.
    33. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
    34. Arjan Ruijs & Herman Vollebergh, 2013. "Lessons from 15 Years of Experience with the Dutch Tax Allowance for Energy Investments for Firms," Working Papers 2013.56, Fondazione Eni Enrico Mattei.
    35. Fullerton, Don & Heutel, Garth, 2007. "The general equilibrium incidence of environmental taxes," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 571-591, April.
    36. Giovanni S. F. Bruno, 2005. "Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals," Stata Journal, StataCorp LP, vol. 5(4), pages 473-500, December.
    37. Jaejoon Woo & Elva Bova & Tidiane Kinda & Yuanyan S Zhang, 2013. "Distributional Consequences of Fiscal Consolidation and the Role of Fiscal Policy; What Do the Data Say?," IMF Working Papers 13/195, International Monetary Fund.
    38. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    39. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    40. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    41. Jeffrey M. Wooldridge, 2015. "Control Function Methods in Applied Econometrics," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 420-445.
    42. Chu, Ke-Young & Davoodi, Hamid & Gupta, Sanjeev, 2000. "Income Distribution and Tax, and Government Social Spending Policies in Developing Countries," WIDER Working Papers 295547, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    43. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
    44. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    45. Dissou, Yazid & Siddiqui, Muhammad Shahid, 2014. "Can carbon taxes be progressive?," Energy Economics, Elsevier, vol. 42(C), pages 88-100.
    46. Anil Duman, 2008. "Education and Income Inequality in Turkey: Does Schooling Matter?," Financial Theory and Practice, Institute of Public Finance, vol. 32(3), pages 369-385.
    47. Duncan, Denvil & Peter, Klara Sabirianova, 2012. "Unequal Inequalities: Do Progressive Taxes Reduce Income Inequality?," IZA Discussion Papers 6910, Institute of Labor Economics (IZA).
    48. Wooldridge, Jeffrey M., 2014. "Quasi-maximum likelihood estimation and testing for nonlinear models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 182(1), pages 226-234.
    49. Florens Flues & Alastair Thomas, 2015. "The distributional effects of energy taxes," OECD Taxation Working Papers 23, OECD Publishing.
    50. Ke-young Chu & Hamid R Davoodi & Sanjeev Gupta, 2000. "Income Distribution and Tax and Government Social Spending Policies in Developing Countries," IMF Working Papers 00/62, International Monetary Fund.
    51. Mieszkowski, Peter, 1969. "Tax Incidence Theory: The Effects of Taxes on the Distribution of Income," Journal of Economic Literature, American Economic Association, vol. 7(4), pages 1103-1124, December.
    52. Mauro Pisu, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 5. Poverty in OECD Countries," OECD Economics Department Working Papers 928, OECD Publishing.
    53. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    54. Barker, Terry & Junankar, Sudhir & Pollitt, Hector & Summerton, Philip, 2007. "Carbon leakage from unilateral Environmental Tax Reforms in Europe, 1995-2005," Energy Policy, Elsevier, vol. 35(12), pages 6281-6292, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Xiaoyu & Yao, Xilong, 2020. "Can energy supply-side and demand-side policies for energy saving and emission reduction be synergistic?--- A simulated study on China's coal capacity cut and carbon tax," Energy Policy, Elsevier, vol. 138(C).
    2. Nadezhda V. Ponomareva & Anna O. Zvereva & Ekaterina V. Golubtsova & Svetlana B. Ilyashenko, 2019. "Tax Incentives for use of Alternative Energy Sources in the Russian Federation," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 144-148.
    3. Djula Borozan, 2018. "Efficiency of Energy Taxes and the Validity of the Residential Electricity Environmental Kuznets Curve in the European Union," Sustainability, MDPI, Open Access Journal, vol. 10(7), pages 1-16, July.

    More about this item

    Keywords

    Energy tax; Environmental tax reform; Income inequality; Gini coefficient;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inteco:v:150:y:2017:i:c:p:80-95. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Haili He). General contact details of provider: http://www.sciencedirect.com/science/journal/21107017 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.