Gradual Green Tax Reforms
Green tax reforms have become an important tool not only in protecting the environment but also in bringing about a more efficient tax system. However, reforms often imply accepting sacrifices in the short-run and bring about the risk of potential political opposition. Within this framework, the debate on whether to implement green tax reforms in one-step or gradually becomes of great interest. In this paper we use a calibrated dynamic general equilibrium model to evaluate different reforms that consist in increasing energy taxes and adjusting capital taxation in a revenue-neutral framework. Our findings show that, although an environmental dividend is always granted, the efficiency dividend depends on the type of reform, its size and how gradually it is implemented. Thus, one-step reforms that produce an efficiency dividend would imply large efficiency costs in the short-run. In this case, the reform could only produce efficiency gains in the short-run if it is implemented gradually, although such gains would end up disappearing in the long-run.
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.:
- de Miguel, Carlos & Manzano, Baltasar, 2011. "Green tax reforms and habits," Resource and Energy Economics, Elsevier, vol. 33(1), pages 231-246, January.
- Burtraw, Dallas & Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1998.
"The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting,"
dp-98-22, Resources For the Future.
- Goulder, Lawrence H. & Parry, Ian W. H. & Williams III, Roberton C. & Burtraw, Dallas, 1999. "The cost-effectiveness of alternative instruments for environmental protection in a second-best setting," Journal of Public Economics, Elsevier, vol. 72(3), pages 329-360, June.
- Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
- Michael Mussa, 1984. "The Adjustment Process and the Timing of Trade Liberalization," NBER Working Papers 1458, National Bureau of Economic Research, Inc.
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