A Note on Weak Double Dividends
A weak double-dividend is the proposition that the welfare improvement from a tax reform, where environmental taxes are used to lower distorting taxes, must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion. A general consensus has emerged that the weak double-dividend is an uncontroversial idea. We show in this note that a weak double-dividend need not hold in a world with multiple distortions.
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