Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234767 
Year of Publication: 
2018
Series/Report no.: 
Document de travail No. 2018-12
Publisher: 
Université du Québec à Montréal, École des sciences de la gestion (ESG UQAM), Département des sciences économiques, Montréal
Abstract: 
We study the welfare e↵ects of a revenue-neutral environmental tax reform in a federation. The reform consists of increasing a tax on a polluting input and reducing that on labor income. Households are fully mobile within the federation. Regions are unequally endowed with a nonrenewable natural resource. Resource rents are owned by regions and are redistributed to citizens on a residence basis, which generates a motive for inefficiently relocating to the resource-rich jurisdiction. Since the resource-poor region has a higher marginal product of labor than does the resource-rich region in equilibrium, the tax reform mitigates the scope of inefficient migration. This positive welfare e↵ect may significantly reduce fiscal costs of pollution pricing and calls for higher environmental tax, as compared with a model where migration is assumed away.
Document Type: 
Working Paper

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