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Welfare-Improving Carbon Dioxide Tax Reform Taking Externality and Location into Account

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  • Douglas Lundin

Abstract

Using Swedish household data from 1992, I analyze whether households disproportionately burdened by an increased carbon dioxide tax can be compensated by changes in other commodity taxes. This is done by searching for Dalton–improving tax reforms (DI-reforms), a method for welfare analysis which requires only ranking of households rather than cardinal comparisons. This application of the method has two features not found in earlier applications. First, the direct value of reduced carbon dioxide emissions is incorporated in the analysis. Second, the method is extended to allow identification of three-dimensional tax reforms, to be able to rank households along three dimensions. It is found that i) incorporating the value of reduced emissions does not unambiguously expand the set of DI-reforms, and ii) DI-reforms exist only when households are ranked in line with expenditures and size. When households' access to public transportation is also considered no DI-reforms are found. Copyright Kluwer Academic Publishers 2001

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  • Douglas Lundin, 2001. "Welfare-Improving Carbon Dioxide Tax Reform Taking Externality and Location into Account," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(5), pages 815-835, November.
    • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:5:p:815-835
    DOI: 10.1023/A:1012851528820
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    7. Mayshar, Joram & Yitzhaki, Shlomo, 1996. "Dalton-improving tax reform: When households differ in ability and needs," Journal of Public Economics, Elsevier, vol. 62(3), pages 399-412, November.
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    1. Tovar Reaños, Miguel A. & Sommerfeld, Katrin, 2018. "Fuel for inequality: Distributional effects of environmental reforms on private transport," Resource and Energy Economics, Elsevier, vol. 51(C), pages 28-43.
    2. Alessandro Santoro, 2007. "Marginal Commodity Tax Reforms: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(4), pages 827-848, September.
    3. Jean-Yves Duclos & Paul Makdissi & Quentin Wodon, 2008. "Socially Improving Tax Reforms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1505-1537, November.
    4. Alberto M. Zanni & Abigail L. Bristow & Mark Wardman, 2013. "The potential behavioural effect of personal carbon trading: results from an experimental survey," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 2(2), pages 222-243, July.
    5. Marcelo Arbex & Christian Trudeau, 2015. "Heterogeneous preferences, atmospheric externalities, and environmental taxation," Working Papers 1503, University of Windsor, Department of Economics, revised Jun 2016.

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