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Environmental Policy and Optimal Taxation in a Decentralized Economic Federation

  • Aronsson, Thomas


    (Department of Economics, Umeå University)

  • Jonsson, Thomas


    (Department of Economics, Umeå University)

  • Sjögren, Tomas


    (Department of Economics, Umeå University)

This paper deals with environmental policy in an economic federation, where each national government faces a mixed tax problem. We assume that the federal government sets emission targets, which are implemented at the national level. We also assume that the economic federation is decentralized, meaning that the national governments are first movers vis-a-vis the federal government. Our results show that each country uses it policy instruments, at least in part, to influence the emission target. This has several implications; first, the commodity taxes do not satisfy the so called additivity property often emphasized in earlier literature and, second, it provides an argument for using distortionary labor income taxation.

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Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 669.

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Length: 29 pages
Date of creation: 13 Jan 2006
Date of revision:
Handle: RePEc:hhs:umnees:0669
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Department of Economics, Umeå University, S-901 87 Umeå, Sweden

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  1. Aronsson, Thomas & Blomquist, Sören, 2000. "Optimal Taxation, Global Externalities and Labor Mobility," Umeå Economic Studies 544, Umeå University, Department of Economics.
  2. Van Der Ploeg, F. & De Zeeuw, A.J., 1990. "International Aspects Of Pollution Control," Papers 9065, Tilburg - Center for Economic Research.
  3. Christiansen, Vidar, 1984. "Which commodity taxes should supplement the income tax?," Journal of Public Economics, Elsevier, vol. 24(2), pages 195-220, July.
  4. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
  5. Clemens Fuest & Bernd Huber, 1997. "Wage bargaining, labor-tax progression, and welfare," Journal of Economics, Springer, vol. 66(2), pages 127-150, June.
  6. Silva, Emilson C. D. & Caplan, Arthur J., 1997. "Transboundary Pollution Control in Federal Systems," Journal of Environmental Economics and Management, Elsevier, vol. 34(2), pages 173-186, October.
  7. Caplan, Arthur J. & Silva, Emilson C. D., 1999. "Federal Acid Rain Games," Journal of Urban Economics, Elsevier, vol. 46(1), pages 25-52, July.
  8. Marklund, Per-Olov & Samakovlis, Eva, 2003. "What is Driving the EU Burden-Sharing Agreement: Efficiency or Equity?," Umeå Economic Studies 620, Umeå University, Department of Economics.
  9. Thomas Aronsson & Tomas Sjögren, 2004. "Is the Optimal Labor Income Tax Progressive in a Unionized Economy?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 661-675, December.
  10. Aronsson, Thomas & Jonsson, Thomas & Sjögren, Tomas, 2004. "Environmental Policy Reforms and the Labor Market in a Global Economy," Umeå Economic Studies 629, Umeå University, Department of Economics.
  11. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  12. Kothenburger, Marko, 2004. "Tax competition in a fiscal union with decentralized leadership," Journal of Urban Economics, Elsevier, vol. 55(3), pages 498-513, May.
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