Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/155029
Authors: 
Marsiliani, Laura
Renström, Thomas I.
Year of Publication: 
1999
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 76.1999
Abstract: 
Tax earmarking imposes a constraint on government policymaking, and may be desirable if it solves a time-inconsistency problem in tax policy. In a two-period economy, in which the policy decisions regarding taxes, public goods provision, and pollution abatement are taken by a majority-elected individual, we show how the time-inconsistency problem in environmental policy arises. We demonstrate that the commitment equilibrium under no earmarking rules cannot be as fully implemented as a no-commitment equilibrium under earmarking rules. However, the earmarking rules do act as a partial commitment mechanism.
Subjects: 
Tax earmarking
fiscal policy
redistributive taxation
endogenous taxation
time inconsistency
environmental tax
pollution abatement
JEL: 
D62
D72
E62
H20
Document Type: 
Working Paper

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