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Tax Revenue-Financed Public Abatement and Welfare: A Consumption Tax Case

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  • Takumi HAIBARA

Abstract

This paper develops a model of public abatement earmarked by either a pollution tax or a consumption tax and shows that consumption tax revenue-financed public abatement is superior to pollution tax revenue-financed public abatement in terms of welfare when the pollution tax rate rises. It implies that the optimal pollution tax rate is higher under consumption tax revenue-financed public abatement than it is under pollution tax revenue-financed public abatement. These results are policy oriented that policy makers of environmental protection are worth considering.

Suggested Citation

  • Takumi HAIBARA, 2006. "Tax Revenue-Financed Public Abatement and Welfare: A Consumption Tax Case," GSICS Working Paper Series 12, Graduate School of International Cooperation Studies, Kobe University.
    • Handle: RePEc:kcs:wpaper:12
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    File URL: http://www.research.kobe-u.ac.jp/gsics-publication/gwps/2006-12.pdf
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    2. Panos Hatzipanayotou & Sajal Lahiri & Michael S. Michael, 2002. "Can cross–border pollution reduce pollution?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(4), pages 805-818, November.
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