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Performing an Environmental Tax Reform in a regional Economy. A Computable General Equilibrium

Author

Listed:
  • Andre, F.J.
  • Cardenete, M.A.
  • Velazquez, E.

Abstract

We use a Computable General Equilibrium model to simulate the effects of an Environmental Tax Reform in a regional economy (Andalusia, Spain).The reform involves imposing a tax on CO2 or SO2 emissions and reducing either the Income Tax or the payroll tax of employers to Social Security, and eventually keeping public deficit unchanged.This approach enables us to test the so-called double dividend hypothesis, which states that this kind of reform is likely to improve both environmental and non-environmental welfare.In the economy under analysis, an employment double dividend arises when the payroll tax is reduced and, if CO2 emissions are selected as environmental target, a (limited) strong double could also be obtained.No double dividend appears when Income Tax is reduced to compensate the environmental tax.

Suggested Citation

  • Andre, F.J. & Cardenete, M.A. & Velazquez, E., 2003. "Performing an Environmental Tax Reform in a regional Economy. A Computable General Equilibrium," Discussion Paper 2003-125, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:4cd82eda-1653-4c9a-a9e9-074cb34306c0
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    File URL: https://pure.uvt.nl/portal/files/599524/125.pdf
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    Cited by:

    1. M. Carmen Lima & M. Alejandro Cardenete, 2005. "Impact Assessment of European Structural Funds in Andalusia - a CGE Approach," ERSA conference papers ersa05p154, European Regional Science Association.

    More about this item

    Keywords

    environmental tax; general equilibrium; regional economics; tax reform; dividends;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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