Environmental Taxes and Economic Welfare: The Welfare Cost of Gasoline Taxation in the U.S. 1959-1999
The purpose of this paper is to provide reasonable estimates for the welfare cost of environmental tax reform in the U.S. economy. Unlike most previous studies that empirically evaluate the deadweight cost of taxation, the model employed here considers explicitly the joint allocation of leisure and commodity demands where the wage rate plays a role both as a form of income and as the price of leisure time. The estimated results of the consumer behavior model indicate that the existing U.S. gasoline tax regime has induced a decrease of gasoline consumption by approximately 4 percent over the period from 1959 to 1999, while the deadweight cost caused by the tax accounts just for about 0.08 percent of the consumer full income over the sample period 1959-1999. Moreover, in most years of the sample period, the measures of marginal deadweight cost of gasoline taxation (sample average 0.1882) are relatively small compared to those of labor taxation (sample average 0.2175). This implies a larger efficiency gain in the case of labor taxation in shifting from the existing distortionary taxation to lump sum taxation. These empirical results might suggest the modest possibility of social welfare gains from tax reforms that shift some of the burden of taxation off labor onto energy (e.g. gasoline).
|Date of creation:||20 Jan 2002|
|Date of revision:||23 Jan 2002|
|Note:||Type of Document - Acrobat PDF; prepared on MS Word; pages: 20; figures: included. IJEE|
|Contact details of provider:|| Web page: http://220.127.116.11|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1997.
"When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets,"
dp-97-18-rev, Resources For the Future.
- Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
- Ian W. H. Parry & Roberton C. Williams III & Lawrence H. Goulder, 1997. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," NBER Working Papers 5967, National Bureau of Economic Research, Inc.
- Jorgenson, Dale W & Slesnick, Daniel T & Stoker, Thomas M, 1988. "Two-Stage Budgeting and Exact Aggregation," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 313-25, July.
- Dale W. Jorgenson, 1997. "Welfare - Vol. 2: Measuring Social Welfare," MIT Press Books, The MIT Press, edition 1, volume 2, number 0262100630, June.
- Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994.
"Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption,"
NBER Working Papers
4864, National Bureau of Economic Research, Inc.
- Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
- King, Mervyn A., 1983. "Welfare analysis of tax reforms using household data," Journal of Public Economics, Elsevier, vol. 21(2), pages 183-214, July.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
- Ballard, Charles L., 1990. "Marginal welfare cost calculations : Differential analysis vs. balanced-budget analysis," Journal of Public Economics, Elsevier, vol. 41(2), pages 263-276, March.
- Stuart, Charles E, 1984. "Welfare Costs per Dollar of Additional Tax Revenue in the United States," American Economic Review, American Economic Association, vol. 74(3), pages 352-62, June.
- Auerbach, Alan J., 1985.
"The theory of excess burden and optimal taxation,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127
- Jorgenson, D.W. & Slesnick, D. & Wilcoxen, P.J., 1992. "Carbon Taxes and Economic Welfare," Harvard Institute of Economic Research Working Papers 1589, Harvard - Institute of Economic Research.
- Blundell, Richard W & Walker, Ian, 1982. "Modelling the Joint Determination of Household Labour Supplies and Commodity Demands," Economic Journal, Royal Economic Society, vol. 92(366), pages 351-64, June.
- Michael Abbott & Orley Ashenfelter, 1974.
"Labor Supply, Commodity Demand, and the Allocation of Time,"
437, Princeton University, Department of Economics, Industrial Relations Section..
- Abbott, Michael & Ashenfelter, Orley, 1976. "Labour Supply, Commodity Demand and the Allocation of Time," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 389-411, October.
- Angus Deaton, 1979.
"Optimal Taxes and the Structure of Preferences,"
506, Princeton University, Department of Economics, Industrial Relations Section..
- Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
- Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
- Slesnick, Daniel T, 1991. "Aggregate Deadweight Loss and Money Metric Social Welfare," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 123-46, February.
- repec:ner:tilbur:urn:nbn:nl:ui:12-73560 is not listed on IDEAS
- Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-08, March.
- Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-48, July.
- Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-51, July.
- Hanemann, Michael & Morey, Edward, 1992. "Separability, partial demand systems, and consumer's surplus measures," Journal of Environmental Economics and Management, Elsevier, vol. 22(3), pages 241-258, May.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwppe:0201003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.