Environmental taxation and the double dividend / Ruud A. de Mooij.

Format:

Book

Author/Creator:

Mooij, Ruud A. de.

Series:

Contributions to economic analysis ; 246.

Contributions to economic analysis ; 246

Language:

English

Subjects (All):

Environmental impact charges--Netherlands.

Environmental impact charges.

Netherlands.

Physical Description:

xviii, 292 pages ; 24 cm.

Edition:

First edition.

Place of Publication:

Amsterdam ; New York : Elsevier Science B.V., 2000.

Contents:

2 A survey of the double-dividend literature 11

2.1 Early literature 12

2.1.1 Environmental tax reform 12

2.1.2 Tax reform versus optimal tax 14

2.1.3 Optimal second-best pollution taxes 15

2.2 Recent literature 17

2.2.1 Environmental tax reform 17

2.2.2 Optimal environmental tax 19

2.3 Tax-shifting 21

2.3.1 Tax shifting between factors 22

2.3.2 Tax shifting across countries 23

2.3.3 Tax shifting between incomes 23

2.4 Political-economy issues 24

2.5 Interactions between dividends 27

3 Environmental tax reform in the benchmark model 29

3.1 The benchmark model 30

3.1.1 Structure of the model 30

Firms 30

Households 31

Government 32

Environmental quality 33

International trade 33

3.1.2 Linearization 34

3.1.3 Welfare 37

Dividing the MEB into distortions 37

Dividing the MEB into dividends 39

3.2 Environmental taxes on households 40

3.2.1 Starting without initial environmental taxes 41

3.2.2 Starting from positive environmental taxes 43

3.2.3 Starting from a Pigovian tax 45

3.3 Environmental taxes on firms 47

3.3.1 Starting without initial environmental taxes 47

3.3.2 Starting from positive environmental taxes 49

3.3.3 Starting from a Pigovian tax 50

3.4 Optimal environmental taxes 51

3.5 Numerical simulations 54

3.5.1 Calibration 54

3.5.2 Simulation results 55

Appendix 3A Behavioral relations 57

Factor demand relations 57

Consumption and labor supply 57

Appendix 3B Marginal excess burden 59

Appendix 3C Analytical solution of the model 61

4 The role of capital mobility and factor substitution 65

4.1 The model with mobile capital in production 66

4.1.1 Structure of the model 67

4.1.2 Linearization 68

4.1.3 Welfare 70

4.2 Optimal taxation 72

4.2.1 Unconstrained optimization 72

4.2.2 Optimal tax with fixed capital or pollution tax 73

4.2.3 Optimal tax with fixed labor tax 77

4.3 Tax reform from labor to pollution taxes 81

4.3.1 Starting from zero non-labor taxes 81

4.3.2 Starting from a positive pollution tax 82

4.3.3 Starting from a positive capital tax 83

4.3.4 Starting from an arbitrary equilibrium 84

4.4 Tax reform from capital to pollution taxes 85

4.4.1 Starting from zero non-labor taxes 85

4.4.2 Starting from a positive pollution tax 85

4.4.3 Starting from a positive capital tax 87

4.4.4 Starting from an arbitrary equilibrium 87

4.5 The model with fixed capital in production 88

4.5.1 Structure of the model 89

4.5.2 Linearization 89

4.5.3 Welfare 92

4.6 Optimal taxation 92

4.6.1 Unconstrained optimization 93

4.6.2 Optimal tax with a fixed profit tax 94

Profits cannot bear the burden of taxation 95

Labor supplied infinitely elastically 96

General case 96

4.6.3 Optimal tax system with fixed pollution tax 97

4.6.4 Optimal tax system with fixed labor tax 97

4.7 Tax reform from labor to pollution taxes 98

4.7.1 Starting from a 100% profit tax 98

4.7.2 Starting from a less than 100% profit tax 99

4.8 Numerical simulations 102

4.8.1 Calibration 103

4.8.2 Model simulations with mobile capital 104

4.8.3 Model simulations with fixed capital 106

Appendix 4A Optimal taxes in the model with mobile capital 109

Appendix 4B Tax reform in the model with mobile capital 111

Endogenous labor tax 112

Endogenous capital income tax 113

Appendix 4C Optimal taxes in the model with fixed capital 114

Appendix 4D Tax reform in the model with fixed capital 117

5 Environmental taxes as trade-policy instruments 121

5.1 The three-country model 123

5.1.1 Structure of the model 123

Country 1 The home country 123

Country 2 The supplier of polluting inputs 125

Country 3 The rest of the world 126

International markets 126

The global environment 127

5.1.2 Linearization 127

The price of polluting inputs 127

The price of intermediate inputs 129

Differences with the benchmark model 130

5.1.3 Welfare 130

Welfare in the home country 130

Welfare in other countries 132

Global welfare 133

5.2 Tax shifting to foreign suppliers of polluting inputs 134

5.2.1 Optimal environmental tax 134

5.2.2 Environmental tax reform 137

5.2.3 Optimal tax from a global perspective 139

5.3 Tax shifting to foreign users of intermediate inputs 141

5.3.1 Optimal environmental tax 141

5.3.2 Environmental tax reform 142

5.3.3 Optimal tax from a global perspective 144

5.4 Numerical simulations 146

5.4.1 Endogenous energy price 147

An OECD-wide energy tax reform 148

An EU-wide energy tax reform 149

5.4.2 Endogenous price of intermediate inputs 150

6 Environmental taxes and distributional concerns 153

6.1 The model with heterogeneous households 156

6.1.1 Structure of the model 157

The modified household model 157

Aggregation 159

6.1.2 Linearization 159

6.1.3 Welfare 161

Distribution of welfare 161

A utilitarian measure for social welfare 163

Two options for revenue recycling 164

6.2 Environmental tax reform 166

6.2.1 Exogenous non-labor incomes 166

Higher non-labor incomes 167

Environmental tax reform 168

The utilitarian strong double dividend 169

Distributional consequences 169

6.2.2 Indexation of non-labor incomes 170

Discussion on the weak double dividend 172

Revenue-raising vs. non-revenue-raising 173

6.3 Numerical simulations 174

6.3.1 Fixed nominal non-labor incomes 175

6.3.2 Indexed real non-labor incomes 176

7 Labor-market imperfections and the triple dividend 179

7.1 The model with an imperfect labor market 182

7.1.1 Structure of the model 182

The wage-bargaining process 183

The reservation wage 185

7.1.2 Linearization 186

Factor demand 188

Value-added per worker 188

Wage rate 188

7.1.3 Welfare 193

7.2 Environmental tax reform 194

7.2.1 Fixed consumer wages 196

Pink welfare 196

Green welfare 197

Blue welfare 198

Overall welfare 200

7.2.2 Effects of labor taxes and labor productivity 200

Indexation to after-tax wages 201

Alternative indexation rules 202

7.2.3 Perfectly competitive labor market 205

7.2.4 Wage curve 208

7.3 Numerical simulations 209

7.3.1 Fixed consumer wages 209

7.3.2 Indexation to after-tax wages 210

7.3.3 Real wage resistance 210

7.3.4 No indexation 212

7.3.5 Wage curve 212

7.3.6 Competitive labor market 213

7.3.7 Results from other studies 214

8 Feedback effects of the environment on the economy 219

8.1 Production externalities 222

8.1.1 The model 222

8.1.2 Environmental tax reform 225

8.1.3 Optimal environmental tax 227

8.2 Non-separable consumption externalities 228

8.2.1 The model 228

8.2.2 Environmental tax reform 231

8.2.3 Optimal environmental tax 232

8.3 Numerical simulations 233

8.3.1 Separable production externalities 233

8.3.2 Non-separable consumption externalities 234

9 Green tax reform in an endogenous growth model 237

9.1 The model 238

9.1.1 Structure of the model 239

Production function 239

Firm behavior 242

Household behavior 243

Government 244

Environmental quality 245

Walras law 245

9.1.2 Linearization 246

9.1.3 Welfare 249

9.2 Effects on growth, pollution and welfare 251

9.2.1 Effects on growth and environment 251

9.2.2 Welfare effects 253

9.2.3 Optimal pollution taxes 254

9.3 Tax shifting 255

9.3.1 Effects on growth and pollution 256

9.3.2 Welfare effects 259

9.4 Pollution permits 260

Appendix 9A Linearizing the factor-demand equations 265

Specification of F 265

Specification of M 265

Specification of N and Y 266

Linearizing marginal factor productivity 266

Linearizing factor-demand equations 267

Appendix 9B Welfare effects 268

Appendix 9C Solution of the model 270

Appendix 9D Pollution permits 272.

Notes:

Includes bibliographical references (pages [281]-292).

ISBN:

0444504915

OCLC:

44046926