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Title:Pollution and capital tax competition within a regional block PDF Logo
Authors:Hadjiyiannis, Costas
Hatzipanayotou, Panos
Michael, Michael S.
Issue Date:2004
Series/Report no.:CESifo working papers 1208
Abstract:The paper examines the interaction among taxes on factors income, environmental quality and welfare. We construct a two-country regional block model with capital mobility and crossborder pollution. Pollution in the two countries is simultaneously abated by the private sector, in response to a pollution tax and by the public sector utilizing income and pollution tax revenue. We demonstrate, among other things, that due to the existence of cross-border pollution in many cases the Nash optimal policy on capital income is a positive tax, even if taxes on the income of immobile factors are chosen optimally. This tax rate increases with the degree of cross-border pollution.
Subjects:optimal income taxes
public pollution abatement
cross-border pollution
capital mobility
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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