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Environmental Policies under Debt Constraint


  • Mouez Fodha

    () (University Paris 1 and Paris School of Economics. Maison des Sciences Economiques)

  • Thomas Seegmuller

    () (Aix-Marseille University (Aix-Marseille School of Economics), CNRS-GREQAM & EHESS)

  • Hiroaki Yamagami

    () (Seikei University, Tokyo)


This article analyzes the consequences of environmental tax policies when the government imposes a constraint on stabilizing public debt. A public sector of pollution abatement is financed by taxation and by issuing public debt. Considering a simple overlapping-generations model, the tax reform stimulates steady-state investment. Then, the environmental quality and the aggregate consumption increase if and only if (i) pollution abatement is large enough and (ii) there is under-accumulation of the per capita capital stock. This arises if environmental taxation allows a decrease of either income taxation or debt-output ratio.

Suggested Citation

  • Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2014. "Environmental Policies under Debt Constraint," AMSE Working Papers 1431, Aix-Marseille School of Economics, Marseille, France, revised Jun 2014.
  • Handle: RePEc:aim:wpaimx:1431

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    More about this item


    environmental tax reform; debt; public emission abatement; double dividend;

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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