Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223426
Authors: 
Garnache, Cloé
Mérel, Pierre
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8354
Abstract: 
This paper derives the incidence of a pollution tax in a stylized general equilibrium framework, building on previous work by Fullerton and Heutel (2007a). Using the CPI as numeraire, we show that tax incidence is a simpler problem than previously thought, and that general insights can be derived without the need to restrict the parameter space. In addition, the counter-intuitive possibility that an increase in the tax could lead to worse pollution outcomes vanishes. The choice of the CPI as numeraire is further justified by the fact that environmental taxes, for instance carbon taxes, are typically indexed on inflation.
Subjects: 
tax incidence
general equilibrium
relative prices
numeraire
JEL: 
Q52
H23
H22
Document Type: 
Working Paper

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