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Health Effects, Tax Deductions for Medical Expenditure, and the Double Dividend

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  • Hiroaki Yamagami

Abstract

This paper presents a general-equilibrium model of environmental tax reform that introduces a health status depending on environmental quality and medical consumption, and tax deductions for medical expenditure. It distinguishes between two types of health effect: environmentally and medically induced. The first effect comes from better environmental quality and increases welfare, while the second comes from changes in medical consumption and produces welfare losses. However, a generalized model shows that welfare gains produced by the presence of tax deductions can offset the medically induced health effect when the initial medical consumption level is sufficiently high. Therefore, this paper explains that identifying budgetary characteristics of medical services may lead to the nonenvironmental dividend.

Suggested Citation

  • Hiroaki Yamagami, 2009. "Health Effects, Tax Deductions for Medical Expenditure, and the Double Dividend," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(1), pages 105-121, March.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200903)65:1_105:hetdfm_2.0.tx_2-s
    DOI: 10.1628/001522108X444170
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    References listed on IDEAS

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    1. Sijbren Cnossen, 2006. "Tobacco taxation in the European Union," CPB Discussion Paper 67, CPB Netherlands Bureau for Economic Policy Analysis.
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    4. R.Andrew Luccasen & R. Morris Coats & G. Karahan, 2005. "Cigarette smuggling mitigates the public health benefits of cigarette taxes," Applied Economics Letters, Taylor & Francis Journals, vol. 12(12), pages 769-773.
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    Cited by:

    1. YAMAGAMI, Hiroaki, 2013. "Environmental tax reform and induced technological change," MPRA Paper 46516, University Library of Munich, Germany.

    More about this item

    Keywords

    environmental tax reform; tax deduction; health effect; medical service; tax interactions;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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