ISSN:
1573-6970
Keywords:
Second-best Environmental Taxation
;
Distortionary Taxation
;
Double-dividend
;
Normalization
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract The double-dividend hypothesisclaims that green taxes will both improve the environment andreduce the distortions of existing taxes. According to the earlierliterature on the double dividend the tax rate for pollutinggoods should be higher than the Pigovian tax which fully internalizesthe marginal social damage from pollution, in order to obtaina ’second dividend‘. On the contrary, Bovenberg and de Mooij(1994) argue that environmental taxes typically exacerbate, ratherthan alleviate, pre-existing distortions. The optimal pollutiontax should therefore lie below the Pigovian tax. This paper pointsout that there is no real contradiction between these apparentlyopposing policy recommendations. It will be shown that the differencein the results appears because, implicitly, different definitionsof the second-best optimal pollution tax are chosen.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1023/A:1008690304507
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