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The Social Aversion to Intergenerational Inequality and the Recycling of a Carbon Tax

Listed author(s):
  • Frederic Gonand

Redistributing the income of a carbon tax impacts the economic activity and the intergenerational inequality, which both influence the intertemporal social welfare. Thus the way a social planner recycles a carbon tax is influenced by its degree of aversion to intergenerational inequality. This article analyses the effect of social aversion to intergenerational inequality on the social choice as concerns implementing and redistributing a carbon tax. It relies on a detailed computable general equilibrium model with overlapping generations and an energy module, with a parameterisation on empirical data. We use two types of social welfare functionals which both incorporate a variable parameter measuring the degree of aversion of the social planner to intergenerational inequality. Results suggest that the social planner recycles a carbon tax through higher public expenditures if its aversion to intergenerational inequity is relatively high. This holds even if recycling through lower income taxes increases activity.

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File URL: http://www.chaireeconomieduclimat.org/RePEc/cec/wpaper/14-07-Cahier-R-2014-12-Gonand.pdf
File Function: First version, 2014
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Paper provided by Chaire Economie du climat in its series Working Papers with number 1412.

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Length: 38 pages
Date of creation: 2014
Handle: RePEc:cec:wpaper:1412
Contact details of provider: Web page: http://www.chaireeconomieduclimat.org

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