IDEAS home Printed from https://ideas.repec.org/p/mns/wpaper/wp202503.html
   My bibliography  Save this paper

The Impact of Green Fiscal Reforms and the Demographic Squeeze: Lessons from Japan

Author

Listed:
  • Jared C. Carbone

    (Department of Economics and Business, Colorado School of Mines)

  • Maxwell Fleming

    (Department of Economics and Business, Colorado School of Mines)

  • Akio Yamazaki

    (National Graduate Institute for Policy Studies (GRIPS))

Abstract

How does carbon pricing perform in an economy with a declining population growth? We develop an overlapping generations model calibrated to Japan. Using this model, we examine how demographic change interacts with green fiscal reforms, in which revenues from carbon pricing are used to improve the efficiency of the tax system. Our results show that demographic change erodes the tax base, so the fiscal response has a larger impact on welfare than the carbon policy itself. Relative to a constant population growth benchmark, ignoring demographic change can overestimate the welfare costs of carbon pricing by 11 percent when pension benefits are reduced and carbon revenues are used to cut capital taxes. Microsimulation analysis indicates that low-income households face higher short-run welfare losses under policies that are most efficient in the long-run, highlighting a trade-off between efficiency and progressivity in the design of carbon pricing in aging economies.

Suggested Citation

  • Jared C. Carbone & Maxwell Fleming & Akio Yamazaki, 2025. "The Impact of Green Fiscal Reforms and the Demographic Squeeze: Lessons from Japan," Working Papers 2025-03, Colorado School of Mines, Division of Economics and Business.
    • Handle: RePEc:mns:wpaper:wp202503
    as

    Download full text from publisher

    File URL: http://econbus-papers.mines.edu/working-papers/wp202503.pdf
    File Function: First version, 2025
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mns:wpaper:wp202503. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jared Carbone (email available below). General contact details of provider: https://edirc.repec.org/data/decsmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.