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Exploring the relationship between environmentally related taxes and inequality in income sources: An empirical cross-country analysis

Author

Listed:
  • Walid Oueslati

    (OECD)

  • Vera Zipperer

    (DIW Berlin)

  • Damien Rousselière

    (University of Angers)

  • Alexandros Dimitropoulos

    (OECD)

Abstract

This paper presents the first empirical analysis of the macroeconomic relationship between environmentally related taxes and inequality in income sources. The analysis also investigates whether this relationship differs between countries which have implemented environmental tax reforms (ETRs) and ones which have not. Following earlier empirical literature, income inequality is measured by the disposable-income-based Gini coefficient. The analysis is based on a panel of all 34 OECD countries spanning the period from 1995 to 2011. Information about the implementation of ETRS in the examined period is collected through a review of relevant academic and policy literature. Empirical results from econometric models reveal that, on average, there is no statistically significant relationship between the overall share of environmentally related tax revenues in GDP and inequality in income sources. However, the relationship varies with the taxed activity under consideration and the existence of an explicit mechanism to redistribute environmentally related tax revenues. In countries where such mechanisms are absent, energy tax revenues (% of GDP) are shown to have a positive, although modest, relationship with income inequality. In contrast, in countries where energy tax revenues are, at least partially, used to reduce tax burden on income and labour, there is a negative relationship between energy taxes and inequality in income sources. On the contrary, no significant relationship is identified between motor vehicle and other transport tax revenues and income inequality, while revenues from other environmentally related taxes, such as waste and air pollution taxes, are negatively associated with income inequality, regardless of the existence of an explicit revenue recycling mechanism. Ce rapport présente la première analyse empirique des effets macroéconomiques des taxes liées à l’environnement sur les inégalités de revenus, ainsi que du rôle que des réformes spécifiques de la fiscalité environnementale peuvent jouer dans l’atténuation de ces effets. Les inégalités de revenus sont ici mesurées par le coefficient de Gini fondé sur le revenu disponible. Cette analyse empirique utilise un nouvel indicateur des réformes fiscales environnementales (RFEs) élaboré sur la base de l’information qualitative recueillie par une étude de la littérature. Contrairement aux études empiriques antérieures, ce document explore l’effet des taxes liées à l’environnement et des RFEs sur les sources de revenus des ménages, plutôt que sur les utilisations de ce revenu. Cette analyse repose sur un panel composé des 34 pays de l’OCDE et couvre la période comprise entre 1995 et 2011. Elle montre que la part générale des recettes tirées des taxes liées à l’environnement dans le produit intérieur brut (PIB) présente une corrélation positive avec les inégalités de revenus. Cependant, cet effet varie selon l’activité assujettie. Alors que l’on a démontré que les recettes issues des taxes sur l’énergie affichent une relation positive avec les inégalités de revenus, aucun effet tranché ne se dessine pour les recettes produites par les taxes sur les véhicules à moteur et les transports. En revanche, les recettes générées par les autres taxes liées à l’environnement, comme celles perçues sur les déchets et sur la pollution atmosphérique, affichent une relation négative avec les inégalités de revenus. Les RFEs examinées jouent un rôle important dans l’atténuation des impacts négatifs des taxes liées à l’environnement (principalement celles sur l’énergie). On constate en particulier qu’elles annulent complètement ces impacts. Ce constat vient étayer l’argument selon lequel les effets distributifs des taxes liées à l’environnement ne devraient pas être considérés comme des obstacles insurmontables au recours à ces taxes dans ce champ de l’action publique, car des RFE conçues avec soin et bien ciblées peuvent atténuer les effets éventuels de ces taxes sur les inégalités de revenus.

Suggested Citation

  • Walid Oueslati & Vera Zipperer & Damien Rousselière & Alexandros Dimitropoulos, 2016. "Exploring the relationship between environmentally related taxes and inequality in income sources: An empirical cross-country analysis," OECD Environment Working Papers 100, OECD Publishing.
  • Handle: RePEc:oec:envaaa:100-en
    DOI: 10.1787/5jm3mbfzkrzp-en
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    File URL: https://doi.org/10.1787/5jm3mbfzkrzp-en
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    Citations

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    Cited by:

    1. Oguzhan Akgun & Boris Cournède & Jean-Marc Fournier, 2017. "The effects of the tax mix on inequality and growth," OECD Economics Department Working Papers 1447, OECD Publishing.
    2. Borozan, Djula, 2019. "Unveiling the heterogeneous effect of energy taxes and income on residential energy consumption," Energy Policy, Elsevier, vol. 129(C), pages 13-22.
    3. Boris Cournède & Jean-Marc Fournier & Peter Hoeller, 2018. "Public finance structure and inclusive growth," OECD Economic Policy Papers 25, OECD Publishing.

    More about this item

    Keywords

    coefficient de Gini; Energy tax; environmental tax reform; Gini coefficient; income inequality; inégalités de revenu; Réformes fiscales environnementales; Taxe sur l’énergie;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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