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Short and Long-term Effects of Environmental Tax Reform

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  • Walid Oueslati

    (Centre for Rural Economy, Newcastle University)

Abstract

This paper examines the macroeconomic effects of an environmental tax reform in a growing economy. A model of endogenous growth based on human capital accumulation is used to numerically simulate the growth effects of different environmental tax reforms and compute their impact on welfare in the short and the long-term. Our results suggest that the magnitude of these effects depends on the type of tax reform. Thus, only environmental tax reform that aims to use the revenue from environmental tax to reduce wage tax and increase the proportion of public spending within GDP, enhances both growth and welfare in the long-term. However, the short-term effect remains negative.

Suggested Citation

  • Walid Oueslati, 2013. "Short and Long-term Effects of Environmental Tax Reform," Working Papers 2013.09, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2013.09
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    File URL: http://www.feem.it/userfiles/attach/201325153444NDL2013-009.pdf
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Greening the tax system works
      by Economic Logician in Economic Logic on 2013-03-29 19:05:00

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    Cited by:

    1. Loganathan, Nanthakumar & Shahbaz, Muhammad & Taha, Roshaiza, 2014. "The link between green taxation and economic growth on CO2 emissions: Fresh evidence from Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 1083-1091.

    More about this item

    Keywords

    Tax reform; Endogenous Growth; Human Capital; Environmental Externality; Transitional Dynamics; Welfare cost;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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