Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labor Markets

Diane Aubert and Mireille Chiroleu-Assouline
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Diane Aubert: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

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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 France than for Germany and UK.

Keywords: Environmental tax reform; Heterogeneity; Unemployment; Welfare analysis; Tax progressivity (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-env, nep-eur and nep-upt
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01550000v1
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Environmental tax reform and income distribution with imperfect heterogeneous labour markets (2019)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets (2019)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets (2019)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets (2017)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labor Markets (2017)
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