Environmental Tax Reform and Endogenous Growth

Bovenberg, A. Lans and De Mooij, Ruud A. (June 1994) Environmental Tax Reform and Endogenous Growth. Former Series > Forschungsberichte / Research Memoranda 344


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Abstract: This paper explores the effects of an environmental tax reform on pollution, economic growth and welfare in an endogenous growth model with pre-existing tax distortions. We find that a shift in the tax mix away from output towards pollution may raise economic growth through two channels. The first channel is an environmental production externality, which determines the positive effect of lower aggregate pollution on the productivity of capital. The second channel is a shift in the taxburden away from the net return on investment towards profits. The paper also shows that, if taxshifting towards profits is large and environmental amenities are unimportant, the optimal tax on pollution may exceed its Pigovian level.;

Item Type: IHS Series
Date Deposited: 26 Sep 2014 10:35
Last Modified: 01 Apr 2016 14:09
URI: https://irihs.ihs.ac.at/id/eprint/744

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