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Excess burden of taxation and environmental policy mix with a consumer-friendly firm

Author

Listed:
  • Leal, Mariel
  • Garcia, Arturo
  • Lee, Sang-Ho

Abstract

This study examines environmental policy mix of tradable emission permits and emission taxes in a duopoly model with a consumer-friendly firm. In the presence of excess burden of taxation, we analyze the interplay of the two policies in the non-equivalent conditions for welfare consequences. We show that emission tax can be redundant and thus policy mix is degenerated when both the excess burden of taxation and the degree of consumer-friendliness are insignificant. However, when the excess burden of taxation is significant, tradable permits policy with tax treatment should be accompanied to enhance welfare in the presence of a consumer-friendly firm. Finally, under the tax revenue-neutral case where the excess burden of taxation does not matter, environmental policy mix is also efficient if the degree of consumer-friendliness is sufficiently high.

Suggested Citation

  • Leal, Mariel & Garcia, Arturo & Lee, Sang-Ho, 2018. "Excess burden of taxation and environmental policy mix with a consumer-friendly firm," MPRA Paper 88256, University Library of Munich, Germany, revised 2018.
  • Handle: RePEc:pra:mprapa:88256
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    consumer-friendly firm; environmental policy mix; excess burden of taxation; tradable emission permits; emission tax;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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