Environmental tax reform: Short-term versus long-term macroeconomic effects
This paper examines the macroeconomic effects of environmental tax reform in a growing economy. A model of endogenous growth based on human capital accumulation is used to simulate numerically the growth effects of different environmental tax reforms and calculate their impact on welfare in the short and the long-term. Our results suggest that the magnitude of these effects depends on the type of tax reform and the presence of a convex adjustment cost for investment. Although, the green tax reform that aims to use the revenue from environmental tax in order to reduce tax on wages is always growth improving, its long term welfare effects depend on the capital adjustment cost. Moreover, regardless of the tax reform scenarios, the short-term welfare effect is always negative.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lans Bovenberg, A. & Smulders, Sjak, 1995.
"Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model,"
Journal of Public Economics,
Elsevier, vol. 57(3), pages 369-391, July.
- Bovenberg, A.L. & Smulders, J.A., 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Other publications TiSEM 6784bb12-71fb-45a5-bf7e-8, School of Economics and Management.
- Bovenberg, A.L. & Smulders, J.A., 1994.
"Transitional impact of environmental policy in an endogenous growth model,"
1994-50, Tilburg University, Center for Economic Research.
- Bovenberg, A Lans & Smulders, Sjak A, 1996. "Transitional Impacts of Environmental Policy in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 861-93, November.
- Bovenberg, A.L. & Smulders, J.A., 1996. "Transitional impacts of environmental policy in an endogenous growth model," Other publications TiSEM e002b2ed-f04f-4ffc-98f8-0, School of Economics and Management.
- Agell, Jonas & Persson, Mats, 2000.
"On the Analytics of the Dynamic Laffer Curve,"
Working Paper Series
2000:5, Uppsala University, Department of Economics.
- repec:ner:tilbur:urn:nbn:nl:ui:12-153405 is not listed on IDEAS
- Minoru Nakada, 2004. "Does Environmental Policy Necessarily Discourage Growth?," Journal of Economics, Springer, vol. 81(3), pages 249-275, 03.
- King, R.G. & Baxter, M., 1990.
"Fiscal Policy In General Equilibrium,"
RCER Working Papers
244, University of Rochester - Center for Economic Research (RCER).
- Bayindir-Upmann, Thorsten & Raith, Matthias G., 2003. "Should high-tax countries pursue revenue-neutral ecological tax reforms?," European Economic Review, Elsevier, vol. 47(1), pages 41-60, February.
- Francesco Ricci, 2007. "Channels of transmission of environmental policy to economic growth: a survey of the theory," Working Papers 17223, Institut National de la Recherche Agronomique, France.
- Frank Hettich, 1998. "Growth effects of a revenue-neutral environmental tax reform," Journal of Economics, Springer, vol. 67(3), pages 287-316, October.
- Ian W.H. Parry & John Norregaard & Dirk Heine, 2012. "Environmental Tax Reform; Principles from Theory and Practice to Date," IMF Working Papers 12/180, International Monetary Fund.
- Ricci, Francesco, 2007.
"Channels of transmission of environmental policy to economic growth: A survey of the theory,"
Elsevier, vol. 60(4), pages 688-699, February.
- Francesco Ricci, 2004. "Channels of Transmission of Environmental Policy to Economic Growth: A Survey of the Theory," Working Papers 2004.52, Fondazione Eni Enrico Mattei.
- Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321.
- Raymond Gradus & Sjak Smulders, 1993.
"The trade-off between environmental care and long-term growth—Pollution in three prototype growth models,"
Journal of Economics,
Springer, vol. 58(1), pages 25-51, February.
- Smulders, J.A. & Gradus, R.H.J.M., 1993. "The trade-off between environmental care and long-term growth : Pollution in three proto-type growth models," Other publications TiSEM f3ec6de7-f996-4ac0-b872-0, School of Economics and Management.
- Minoru Nakada, 2010. "Environmental Tax Reform and Growth: Income Tax Cuts or Profits Tax Reduction," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(4), pages 549-565, December.
- Lawrence H. Goulder, 1998. "Environmental Policy Making in a Second-Best Setting," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 279-328, November.
- Bovenberg, A.L. & de Mooij, R.A., 1994.
"Environmental tax reform and endogenous growth,"
1994-98, Tilburg University, Center for Economic Research.
- Jorgenson, D.W. & Wilcoxen, P.J., 1992.
"Reducing US Carbon Dioxide Emissions: An Assessment of Different Instruments,"
Harvard Institute of Economic Research Working Papers
1590, Harvard - Institute of Economic Research.
- Jorgenson, Dale W. & Wilcoxen, Peter J., 1993. "Reducing U.S. carbon dioxide emissions: an assessment of different instruments," Journal of Policy Modeling, Elsevier, vol. 15(5-6), pages 491-520.
- Gerhard Glomm & Daiji Kawaguchi & Facundo Sepulveda, 2006.
"Green Taxes and Double Dividends in a Dynamic Economy,"
Caepr Working Papers
2006-017, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
- Glomm, Gerhard & Kawaguchi, Daiji & Sepulveda, Facundo, 2008. "Green taxes and double dividends in a dynamic economy," Journal of Policy Modeling, Elsevier, vol. 30(1), pages 19-32.
- Hart, Rob, 2004. "Growth, environment and innovation--a model with production vintages and environmentally oriented research," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1078-1098, November.
- repec:ner:tilbur:urn:nbn:nl:ui:12-73103 is not listed on IDEAS
- Vellinga, Nico, 1999. "Multiplicative utility and the influence of environmental care on the short-term economic growth rate," Economic Modelling, Elsevier, vol. 16(3), pages 307-330, August.
- Grimaud, Andre, 1999. "Pollution Permits and Sustainable Growth in a Schumpeterian Model," Journal of Environmental Economics and Management, Elsevier, vol. 38(3), pages 249-266, November.
- Fullerton, Don & Kim, Seung-Rae, 2008.
"Environmental investment and policy with distortionary taxes, and endogenous growth,"
Journal of Environmental Economics and Management,
Elsevier, vol. 56(2), pages 141-154, September.
- Don Fullerton & Seung-Rae Kim, 2006. "Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth," NBER Working Papers 12070, National Bureau of Economic Research, Inc.
- Chen, Jhy-hwa & Shieh, Jhy-yuan & Chang, Juin-jen & Lai, Ching-chong, 2009. "Growth, welfare and transitional dynamics in an endogenously growing economy with abatement labor," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 423-437, September.
- Ligthart, Jenny E. & van der Ploeg, Frederick, 1994. "Pollution, the cost of public funds and endogenous growth," Economics Letters, Elsevier, vol. 46(4), pages 339-349, December.
- Bretschger, L. & Smulders, J.A., 2007.
"Sustainable resource use and economic dynamics,"
Other publications TiSEM
fb7079e5-6c6e-4960-91f8-8, School of Economics and Management.
- repec:ner:tilbur:urn:nbn:nl:ui:12-153411 is not listed on IDEAS
- repec:ner:tilbur:urn:nbn:nl:ui:12-376258 is not listed on IDEAS
- Fernández, Esther & Pérez, Rafaela & Ruiz, Jesús, 2011. "Optimal green tax reforms yielding double dividend," Energy Policy, Elsevier, vol. 39(7), pages 4253-4263, July.
- Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
- Koskela, Erkki & Schob, Ronnie, 1999. "Alleviating unemployment:: The case for green tax reforms," European Economic Review, Elsevier, vol. 43(9), pages 1723-1746, October.
- A. Bovenberg, 1999. "Green Tax Reforms and the Double Dividend: an Updated Reader's Guide," International Tax and Public Finance, Springer, vol. 6(3), pages 421-443, August.
- repec:ner:tilbur:urn:nbn:nl:ui:12-74434 is not listed on IDEAS
- Alfred Greiner, 2005. "Fiscal Policy In An Endogenous Growth Model With Public Capital And Pollution," The Japanese Economic Review, Japanese Economic Association, vol. 56(1), pages 67-84.
- Treadway, Arthur B, 1969. "On Rational Entrepreneurial Behaviour and the Demand for Investment," Review of Economic Studies, Wiley Blackwell, vol. 36(106), pages 227-39, April.
When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:40:y:2014:i:c:p:190-201. 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: (Zhang, Lei)
If references are entirely missing, you can add them using this form.