Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/167484
Authors: 
Aubert, Diane
Chiroleu-Assouline, Mireille
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6498
Abstract: 
This paper investigates the distributional and efficiency consequences of an environmental tax reform, when the revenue from the green tax is recycled by varying labor tax rates. We build a general equilibrium model with imperfect heterogeneous labor markets, pollution consumption externalities, and non-homothetic preferences (Stone-Geary utility). We show that in the case where the reform appears to be regressive, the gains from the double dividend can be made Pareto improving by using a redistributive non-linear income tax if redistribution is initially not too large. Moreover, the increase of progressivity acts on unemployment and can moderate the trade-off between equity and efficiency. We finally provide numerical illustrations for three European countries featuring different labor market behaviors. We show that a double dividend may be obtained without worsening the initial inequalities if the green tax revenues are redistributed with a progressivity index lower for UK than for France and Germany.
Subjects: 
environmental tax reform
heterogeneity
unemployment
welfare analysis
tax progressivity
JEL: 
D62
D63
H23
Q52
Q58
Document Type: 
Working Paper

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